APR Explained
APR stands for the phrase ‘annual percentage rate’. The annual percentage rate will be one of the most important factors that you will come across when looking for a credit card, as it represents the total charges that will be made for the credit that you use. As well as interest rates, APR also includes any additional fees that may be imposed upon you such as arrangement or administration fees. Statutory law establishes the way in which APR must be calculated, so you can use APR as a measuring tool with confidence. By law all credit providers must disclose the true APR of their product to a customer before a credit agreement is signed.
APR is charged in either one of two ways in the UK. It is important to distinguish whether APR is being charged at a variable or fixed rate when you are assessing a credit card. Moreover, when looking at a range of cards be sure to compare like with like - compare variable rate cards with other variables and fixed rate cards with other fixed rates. Variable rates usually start off being considerably lower than their fixed partners but are subject to the risk of change- though note that variable rate can go down as well as up. Fixed rates might appear more expensive than the variable rate but offer the security of continuity.
Watch out for credit card providers who express the APR on their product as a monthly percentage. It is easy to confuse these types of figures with the true APR at a glance and you could be taken in. If you see an APR that appears to be suspiciously low then be sure to take a second look.
Once you have your credit card be sure to check your monthly statement thoroughly. This way you can watch out for a variable interest rate creeping up substantially. Your card might have been the best available on the market when you first got it, but it might not be anymore. Change credit card providers if your APR has ceased to be a good deal.
