What is APR?

What is APR

They are three little letters but understanding them can make a big difference to your money confidence.

APR stands for Annual Percentage Rate, a standard measure that lets you compare the cost of borrowing.

At this time of year, perhaps with a summer staycation to pay off, Black Friday deals on the horizon, and Christmas to plan for, you may be looking at credit cards and loans to give you more options to balance the cost.

This simple Q&A guide will tell you everything you need to know to understand APR.

What is APR?

The Annual Percentage Rate shows the total cost of borrowing money, so you can compare different providers and offers.

Isn’t that the same as an interest rate?

No, because as well as the interest you have to pay, it includes any other fees and charges, such as an annual fee for a credit card, or a loan arrangement fee.

Hang on, what’s representative APR then?

The Representative APR is based on a rate that at least 51% of customers seeing the promotion and applying will get.

The actual rate you get when you apply is specific to you, based on your application and credit-scoring.

Find out more about your credit rating and how to improve it here.

Will my APR always stay the same?

Not necessarily. If a loan has a fixed APR, you’ll know from the outset how much your payments will be, and the total you will pay overall. However, any credit card with a variable APR, can change at any time. Your credit card issuer will need to let you know about these changes in advance.

I’m getting a 0% balance transfer card, so I don’t need to bother about APR, right?

It’s still just as important to compare the APR you will pay on new purchases and on the balance once the 0% period comes to an end. Once the introductory rate comes to an end, its usually replaced by a higher rate, which will depend on a number of features including your credit score. Find out more about your credit rating and how to improve it here.

Anything else to watch out for?

Yes - APR does not include all potential charges, such as fees for missing a payment or spending more than your credit limit, fees for withdrawing cash on a credit card, and currency conversion if you make purchases abroad. So, make sure you are aware of all the terms and conditions of your borrowing before you sign up.

TSB’s Advance Credit Card has no annual fee, and a representative APR of 9.9% (variable).

18+ UK residents only. Subject to status and lending criteria.

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