credit cards can be a truly utilitarian tool to help spread the cost of outgo or to enable you to buy larger items or expensive purchases like a vacation. however, it is important to understand how they work and how credit card interest is charged, so that you can avoid unnecessary charges. Join the 800,000+ Uswitch app users who have taken control of their bills
How to calculate credit card interest
Credit circuit board concern rates are normally quoted in terms of APR ( annual percentage rate ) . A low or lower APR means you will have less sake to pay on your credit card debt. It will cost less to borrow money than if your credit card had a high APR. however, some credit cards have longer interest-free periods which will besides affect the amount of interest you are charged . You besides need to factor in the cost of any annual fees associated with the menu, as these may be included in the overall APR figure for the year. For model, a credit batting order quote might give you the overall APR, including the card fee, and a different interest rate for purchases, minus any tease fee . indeed if you want to know how to work out the interest rate on a credit rating batting order you need to look at the small mark. The median APR of a recognition card in the UK without an annual card fee is about 19 %, but many cards, particularly store cards, charge a much higher APR . The other point to bear in mind is that when you look at credit tease offers, the APR will be “ representative ”. This means that you may not be offered the same APR if you are approved for the card. Your concern rate may be more, for example if you have a poor credit rate and are considered a higher risk customer .
How is credit card interest calculated in the UK?
When you ‘re approved for a credit tease you can use it to buy goods and services up to your set credit restrict, which is the maximum amount of money you are allowed to borrow. Each month you receive a statement detailing what you have spent and when on your credit circuit board . besides, at the time of the statement you will be told the minimal requital that you need to make towards repaying your credit poster debt that month. You can pay off the whole of your debt in wide if you wish, but if not, you must make the minimal requital . The remaining balance wheel – how much you owe, minus the minimum payment – is then capable to concern. The pastime, known as the Annual Percentage Rate or APR, is charged on your debt unless you have an interest exempt time period .
How does the Annual Percentage Rate work?
The annual share Rate ( APR ) is the amount of concern you pay on the outstanding poise on your credit card. If you pay off your citation calling card in full each month then you will not be charged any concern . even where you have an outstanding balance on your credit rating menu you may not have to pay an APR on the accredit wag debt. That ‘s because many credit cards offer concern free periods .
When do I start paying the APR interest rate on my credit card?
You will start to pay the APR on the great symmetry once the interest rid period ends. therefore, it ‘s significant to work out the poise between any matter to release period that you are offered, and the APR you might have to pay. There ‘s more to choosing the right card than getting one with the lowest APR.
What does APR actually mean?
APR helps you to compare cards by averaging out the entire costs over the year. however, interest is charged on a monthly basis . This television explains how lenders calculate their interest rates and what your card will actually cost you .
