What is an Interest Rate/APR?
The APR (Annual Percentage Rate) and the interest rate of a credit card are the same thing. This is the percent form of the amount the company charges you for borrowing money. An Introductory APR is the initial interest rate for your credit card that companies use to try and persuade you to get their card. However, this is temporary and after a certain amount of time your interest rate goes back up to the normal rate again. A credit card’s APR is usually a wide range percent like 11.94%-15.94%. This is because the customers with good credit who pay off their dues on time are much more likely to get charged with a lower interest rate than those who do not do so.
Let’s discuss interest rates in terms of owing a friend money. If Lisa gave Brenda a dollar, and Brenda said she was charging her 1% interest every week she didn’t pay her back, at the end of the first week, Lisa would owe Brenda $1.01.
Let's discuss interest rate in credit card terms. Let’s say you have an interest rate of 5% and you’ve borrowed $400 in the first month. When it comes time to pay it off, your interest rate will be broken up monthly and then multiplied by your amount owed. So, you end up owing $401.66. Remember: credit card companies are not your friend! They break up the interest rate every month so that they’ll end up charging you more than if they just charged you 5% on the amount you owe at the end of the year. This accumulates the longer you put off what you owe, and you can end up owing much more than what you initially spent. The diagram below represents the balance owed after 3 months by someone who spends $400 with a 5% interest rate and doesn’t pay anything off.
Let’s discuss interest rates in terms of owing a friend money. If Lisa gave Brenda a dollar, and Brenda said she was charging her 1% interest every week she didn’t pay her back, at the end of the first week, Lisa would owe Brenda $1.01.
Let's discuss interest rate in credit card terms. Let’s say you have an interest rate of 5% and you’ve borrowed $400 in the first month. When it comes time to pay it off, your interest rate will be broken up monthly and then multiplied by your amount owed. So, you end up owing $401.66. Remember: credit card companies are not your friend! They break up the interest rate every month so that they’ll end up charging you more than if they just charged you 5% on the amount you owe at the end of the year. This accumulates the longer you put off what you owe, and you can end up owing much more than what you initially spent. The diagram below represents the balance owed after 3 months by someone who spends $400 with a 5% interest rate and doesn’t pay anything off.