What is APR – and does yours measure up?

what is aprIf you’ve ever shopped around for credit cards, you’ve probably seen the term “APR”, with lots of associated footnotes. You know it’s related to your interest rates, but most people aren’t sure – what is APR?

APR stands for annual percentage rate, and it is used in all sorts of financial settings where you’re borrowing money, including credit cards, auto loans, mortgages, and more. For credit cards, this represents your interest rate over the course of the year. If you carry a balance on your credit card (meaning you don’t pay your full statement balance down every month), the amount of the interest payments you’ll owe to your card depends on your APR. For those who won’t carry a balance, APR is a less important factor in choosing a card. If you might need to carry a balance, a low APR can save you a lot of money in the long term. It’s important to pay attention to that rate when you’re deciding between credit cards. We’ll tell you everything you need to know to be an expert on your APR options.

What is APR?

APR, or annual percentage rate, is used to calculate what you owe your credit card company if you don’t pay your full bill on time. However, it’s not quite as easy as just multiplying your general APR by your outstanding balance to figure out what you owe. First, you need to get that annual rate down to the rate your credit card will use.

First, divide the APR of your credit card candidates by the number of days in a year, to get your daily periodic rate:

Then, multiply the daily rate by the number of the days in the billing period to get your monthly rate. Finally, multiply that rate by your outstanding balance to find out how much interest you’d owe:

However, when you compare APRs for credit card offers, they’ll all be broken down the same way. To choose between credit cards, no need to do the math – just choose the card with the lowest purchase APR, both during the promotional period and afterwards.

My options list different types of APRs – what do they mean?

Many credit cards have different APRs for different uses of the credit card. So, you may not pay the same interest rate on normal credit card purchases as you would on a cash advance. Here’s a quick guide to the four most common types of APR:

  • Introductory APR: the rate that will be applied during the “introductory” period, when you first get the card. This APR may apply to your purchases, a balance transfer, or any other combination of things during a limited time window.
  • Purchase APR: the rate for your normal credit card purchases.
  • Cash Advance APR: the rate the will be applied to any cash advances you get from your credit card. If you anticipate needing to get a cash advance, make sure to check the fine print here. The rates are often higher, and there may not be a grace period.
  • Penalty APR: the highest rate, which may be used if you violate the terms of your credit card in some way. You could do this by failing to pay at least the minimum due on your credit card bill by the due date, for example.

Make sure to take a close look at all of the card’s types of APR, not just the low introductory rates. Better rates for some of these types may help you differentiate between all the card options out there.

What’s a good APR? What can I expect?

The APRs you’re offered will depend on your credit score, and the cards you’re looking at. Promotions may make APRs for some cards look lower than they’ll be for the long term, so make sure you know what you’re getting into. Right now, the average APR for all cards is 17.15%.

However, this number depends on what kind of card you’re looking at. Especially around the holiday shopping season, beware of tempting offers for store cards, which have a median APR of 25.64%.

If you’re considering a card with an APR above the average, 17.5%, it may be best to keep shopping around. The average low interest card has a rate of only 14.19%, so there are good options out there.

So, what is APR? Your credit card APR determines how much you’ll owe your credit card company if you don’t pay your statement balances down in full and on time. Pay attention to the APRs that you’ll plan to use. For many, that will be your purchase APR. Make sure it’s close to or below the average, especially if you have a good credit score. That score means you should be getting the best rates! Making APR comparisons the key to your credit card choice will help you save money in the long run.

How to Improve Your Credit Score: 3 steps to take today

how to improve your credit score

You’ve heard it before, and you’ll probably hear it again – it’s important to have a good credit score. If you have a high credit score, you’re showing lenders that you’re a good risk. That means you are more likely to pay your loan (or credit card bill, etc.) back on time and in full. Having a lower credit score can actually be pretty expensive in the long run. Loans, including mortgages, will carry higher interest rates, and you may also find you’re not eligible for credit cards with higher rewards, or even better cell phone plans. We’ve gone into greater detail on why you should you care about your credit score before. Here are a few simple tips on how you can take your score to the next level

Is your credit card annual fee worth it?

credit card annual feeFree money from your credit card company can never be a bad thing as long as you’re staying on top of your payments – can it? For the most part, no. As long as you’re paying your bills on time and in full, earning more rewards is usually a good thing. However, if you’re paying an annual fee on your card, your rewards earnings may not be worth as much they seem.

That pesky charge can be easy to forget until you see it on your statement, especially when credit cards waive the annual fee in your first year,. If you have one, evaluating your credit card annual fee should be a key part of your decision to choose one credit card over another. Follow this step by step guide to decide whether your annual fee is worth it, or not.

How to Get in Shape for Free

get in shapeAfter enjoying a big Thanksgiving meal last week (and probably more than a few leftovers sandwiches this weekend), hitting the gym or signing up for a workout class might have crossed your mind once or twice. Lots of people start thinking about how to get in shape after the holidays – in fact, it was the top New Year’s resolution in 2017.

But for the budget conscious among us, the price tag of gym memberships and boutique fitness classes can be a little daunting. The number 2 New Year’s resolution last year was to make better financial decisions. The cost of trendier fitness options may leave you wondering – is it possible to do both? The two don’t have to be mutually exclusive. Our tips can help you do both – get in shape for less.

5 Personal Finance Tips to be Thankful for

personal financeWith Thanksgiving only a couple of days away, you’re probably feeling like Black Friday ads are inescapable. You may also have started thinking about the other, less commercial part of Thanksgiving – what you’re thankful for this year. At Debitize, we’re thankful for any and everything that makes personal finance easy and stress-free.

Staying on top of your personal finance should be simple and empowering, not stressful and mysterious. That’s why we’re sharing five of our favorite personal finance tips that the Debitize team is thankful for this year. Follow these tips, and you just might add something to the list of things you’re thankful for this year, too!

Master holiday shopping for less

Maybe you’re dreading the onset of holiday shopping, or maybe you can’t wait to get started. Whichever approach you take to holiday shopping, the thought of how much you’ll be spending on gifts and parties is probably daunting.

Last year, U.S. shoppers racked up an average of $1,054 in credit card debt during the holiday season, according to a MagnifyMoney survey. About half of those people planned to pay off the debt within 3 months, but nearly 30% didn’t expect to pay that debt off within 5+ months. The interest charges on that debt really add up!

holiday shopping

This year, don’t be one of the holiday shoppers burning money on credit card interest payments. Plan ahead using our comprehensive guide to holiday shopping for less, and avoid paying interest just for bringing holiday cheer.

10 Expenses to Trim or Eliminate for a Healthier Budget

budgetIs your budget looking a little bloated? If so, it could probably stand to slim down.

Financially, it’s hard to argue with the prospect. But it’s easier said than done—a “no pain, no gain” kind of situation, isn’t it?

Maybe not.

Trimming a budget isn’t a zero-sum game. With a little creativity, you can find a few expenses that can either be reduced or completely eliminated without adversely affecting your quality of life. Some could even be staring you in the face right now.

Friendsgiving Ideas: How to Host on a Budget

friendsgiving ideasEveryone around you has started trying to firm up Thanksgiving travel plans, and grocery stores are bombarding you with Thanksgiving-related deals and coupons. It’s that time of year again. Whether you’re visiting family in your hometown for Thanksgiving or not, you might be looking for a way to show how thankful you are for your friends. Enter – Friendsgiving. Friendsgiving may have been popular for a few years now, but it’s still a fun way to gather everyone together before the holiday season begins in earnest to celebrate a great year.

Hosting a Friendsgiving celebration can be tons of fun – but it can also get expensive, fast. A whole turkey, a full bar, and side dishes add up quickly. If you’re trying to save for holiday shopping or to meet end-of-year savings goals, hosting a traditional Thanksgiving meal for friends on top of travelling for the holiday itself may sound daunting, but fear not. Follow these four Friendsgiving ideas, and you’ll be hosting Friendsgiving for as little as $45 or less.

7 Ways to Earn More Travel Rewards – and make the most of them

Travel RewardsHave you ever wished you could travel more? You’re not the only one. A survey conducted by OnePoll earlier this year showed that 76% of Americans wished they could travel more. When you’re dreaming of taking a trip to the beach or some far flung city, you take a look at your budget and realize that taking a trip to a nearby restaurant is probably a better idea than jetting off to Paris.

What Debt to Pay Off First to Increase Your Credit Score

Americans’ total debt hit a new high of $13 trillion last year, and about 80% of Americans are in debt. Many of the 80% of Americans with debt are working to pay it off, but in the meantime, carrying debt can have a significant impact on their credit scores. A good credit score saves you tons of money, so any improvements you make while paying down your debt could make a big difference. When you’re creating a plan to pay down debt, you should consider what debt to pay down first to increase your credit score.