PSCC - APR Lesson

APR

Annual Percentage Rate

Credit cards usually use their APR as a selling point for new customers. But, what is an APR?

An APR, or annual percentage rate, is an interest rate that is applied to the credit card balance each period. The period could be each month, quarterly, etc. The APR can be found by adding up all of the periodic rates, or if the rate remains the same throughout the year, you can multiply the rate by the number of periods.

APR = Periodic Rate x Number of Periods in a Year

Periodic Rate = APR / number of periods

 

Example 1: What is the APR of a credit card that has a daily periodic rate of 0.06%?

APR = Periodic Rate x Number of Periods in a Year

APR = 0.06 x 365

APR = 21.9%

 

Example 2: What is the monthly periodic interest rate for a credit card with an APR of 22.4%?

Periodic Rate = APR / number of periods

Periodic Rate = 22.4 / 12

Periodic Rate = 1.9%

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Annual Percentage Rate Practice

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Credit Card Comparisons Extension

Sometimes, credit card companies make their fees hard to find. Look up three different credit cards and find out information about their fees. Use the chart linked below to help compare. Which credit card seems like the best option?

Extension Activity Document - Comparing Credit Cards Links to an external site.

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