Credit Card APR: Full form, Meaning, Calculating, & Choosing Wisely
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Understanding the Annual Percentage Rate in Credit Card

What is APR?

APR, or Annual Percentage Rate, is the cost of borrowing on a credit card expressed as an annual interest rate. It includes not only the interest rate but also any additional fees or charges imposed by the lender.

How to calculate APR?

APR is calculated by combining various charges and annualising them. Compounding plays a role in determining the effective APR.

The formula for calculating APR

APR = [(Total Interest and Fees) / (Total Principal Borrowed)] x 365 / (Number of Days Borrowed) APR combines fees and interest, annualises them, and factors in compounding to determine the comprehensive Annual Percentage Rate.

Types of APR in Credit Card

There are two primary types of APR in credit cards: ● Fixed Variable ● Variable APR

Fixed Variable APR

A Fixed Variable APR is a rate that doesn't change. It remains constant, providing predictability in interest charges.

Variable APR

Variable APRs can fluctuate based on changes in market interest rates or other factors. They can be higher or lower than fixed APRs, making them more unpredictable.

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