Understanding that APR stuff is make or break to having a healthy relationship with our credit cards. But sometimes, it is one of those terms that everyone is using, and so we just didn’t ask more to really figure it out.
Well here’s your Bright Life Guide to what APR means and how to apply it like a pro.
The Annual Percentage Rate (APR) is the annual rate of interest that an individual pays on a loan or their credit cards. APR is a term used across the board whether for mortgages, auto loans, personal loans, or with your credit cards.
When deciding between credit cards, comparing the APR on each card is your single most important factor to help you understand how expensive it will be to hold a balance on a card.
Sometimes you will also see the terms MPR or DPR.
MPR is your monthly percentage rate and DPR means the Daily percentage rate. When you divide APR by 12, you get an average rate which is called MPR. Similarly, when you can calculate the DPR by dividing APR by 365.
The minimum dues are calculated on a monthly cycle so it is always a good idea to have in mind what is the effective MPR of a card.
Credit card companies offer a “grace period”. This is the period between the statement date and the due date. It is typically a 3 week period but it can vary on some cards.
What this means is that if the balance on the card is fully cleared before this grace period, there will be zero interest accrued which will shown in the next statement, and will increase the minimum due amount that is owed.
However, if a customer already is carrying a card balance from the previous statement period, then in most cases, the grace period does apply. Interest on the transactions starts getting charged from the moment of the transaction.
You can learn more about Credit Card terms at this link: The 9 terms you must know in all that Credit card mumbo jumbo!
To limit the costs of credit card debt, you have to be selective and avoid higher APR cards as much as possible.
Interest payments will show up down the line, as recurring monthly costs!
Before you get any credit card, keep in mind:
Would you believe there are up to 6 different ways that a bank or card company can use your APR to calculate your interest? Most card companies use the ‘Average Daily Balance’ method, but other methods can also apply.
Before you apply for a credit card, read the offers, terms and conditions but also the APRs.The “APR” is important info if you are going to carry balances on this card. It can seem murky and complicated but be aware and you will spot a high APR.
The Bright app gives you the ability to see all your APRs in one place. It also helps your prioritize how you handle your credit cards so you pay more attention to the higher APRs ones which are more costly.
You can learn more about how Bright works to manage your credit cards.
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