A simples guide

What is credit card APR?

If you’ve ever tried to get a credit card, or indeed any number of financial products, you may have seen a term known as APR.


Those three letters can be found all over the internet, adverts on television, and even radio. The general public are still left wondering what it is and why it exists. This is for you if you’ve ever found yourself asking: “What is APR on a credit card?” 

Annual percentage rate (APR) explained

Finally, an answer to the question: “What does APR stand for?”

Traditionally, Annual Percentage Rate (APR) has been a catch-all for the interest charged on various financial products, including mortgages, loans, and credit cards. March 2016 has changed things slightly, however. We now use APR on unsecured lending, and APRC for secured loans and mortgages, for example.

APR is supposed to show the amount of interest that you will pay per year when borrowing. It’s a legal requirement that lenders display information regarding their APR clearly so that customers can make informed decisions by comparing different products’ APR.

In the financial world, you will come across your personal APR and the typical APR. This may seem confusing at the moment, but we’ll cover the difference in a little while. It will all make sense soon!

What is credit card APR?

How are interest rates calculated?

The basic idea of APR is to inform you of how much interest you’ll pay on an annual basis over the full term of your debt. However, when rates change, this can quickly become confusing. An overview of how APR works would look a little like this:

1) You max out your credit card at £1000, and it has an APR of 10%

2) If you don’t repay anything over the course of a year, the total repayable would be £1100

As long as you make minimum repayments each month, you will end up paying less interest. Of course, the longer the period of repayment, the lower the monthly repayments will be. However, you will end up paying more interest, as the APR compounds. In simple terms, compound interest is interest on interest! It sounds confusing but it basically calculates the interest gained on the combined total sum borrowed and the interest it has already accrued. 

What is the difference between personal and representative APR?

Earlier in the article, we promised to discuss personal and representative APR in a little more depth. We haven’t forgotten. We’re sure you haven’t, either.

Personal APR is fairly simple. It is the rate of interest that you will pay if you borrow money on a particular financial product, like a credit card.

Representative APR is a little different. When you see commercials for financial products, it is this type of APR that is mentioned. Put simply; representative APR is the rate that at least 51% of people would pay if they were to choose the product in question.

When you see a representative APR, remember that up to 49% of applicants would end up paying a higher rate. That is why it is so important to read the small print before agreeing to borrow any sum.

What is the difference between personal and representative APR?

Is APR the most important thing to consider when borrowing?

APR is important, and it makes sense to assume that it’s always the most important thing for borrowers to think about. The first thing to consider whenever you’re looking to borrow money is whether or not borrowing is a sensible financial decision. If you decide that it is, then by all means, take a closer look at the offers available from lenders and the APR rates advertised.

How do I find a credit card with an APR that suits my needs?

You can make use of our comparison service by comparing a range of credit cards from some of the biggest lenders in the country. When you get your results, you’ll be able to compare the details and the APR of each card. 

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