The Role of APR in Determining the Worth of Credit Cards


When choosing an airline credit card, besides looking at the rewards and benefits you must focus on the core credit card worth by considering how much competitive it is with other credit cards belonging to the same class. In the end, all advantages in terms of rewards and perks could turn fruitless if you have to pay APR or Average Percentage Rate that is higher than the average. And in order to avail the best interest, you must have a good credit score. But if you are availing an airline credit card, then most likely the interest rate would be higher in order to balance the high rewards and benefits that come with it.

Airline credit cards are like any other credit cards used for purchasing anything, and its specialty is in the rewards and benefits in the form of flying miles which are redeemable for discounted or free flights during future travels. Naturally, this card suits them best who frequently fly as they get the opportunities of maximizing the rewards. Leaving aside the rewards, the features of the credit are no different from any other credit card in enhancing the purchasing power of the cardholders.  Not only you can use the card for travel-related expenses like restaurants, hotels, and car rentals you can use it for any purchase, including groceries, clothing, and pet supplies. Although the card offers exclusive travel benefits, to judge its real worth, you must consider the APR associated with it.

Rewards are attractive, but credit cards must be pocket-friendly so that you can enjoy the convenience of its use together with rewards and benefits even more. Rewards are sweeter only when you pay less interest on credits.

In this article, we will discuss the importance of APR for credit cards that should help you in choosing any type of credit card based on the PFA editor review.

Determining APR for your credit card

The acronym APR relates to Average Percentage Rate that credit card companies charge on credit card balances.  It represents the annual cost of funds but also applicable to short-term loans. Since APR is applicable only on the outstanding balance on your credit card, if you knock off balances regularly, you will not have to pay any interest at all.  The APR and fee structure of credit card varies according to the type of card that you can know about from the table provided on the website of the credit card company or during the application process if it is online.

There may be a single APR applied across all types of credit cards, or there can be a range or few options.  The APR on basic credit cards would be lower than reward credit cards that offer more value to users, and the interest will be higher for people with bad credit and on stores credit cards.

Many credit card companies offer more than one APR on one type of card because they consider the creditworthiness of applicants to arrive at the interest rate. The lower is the credit score, higher is the risk perception, and more will be the interest.

Why you must look out for good APR

APR is one of the most important features of credit cards that influence the choice of card and therefore you must study its pros and cons to weigh how it fares in comparison to the rewards and benefits that the card carries.  Finally, it boils down to the manner of use of the credit card because if you do not carry a balance on the card, you need not worry about APR.  For you, focusing on the rewards and benefits would be more attractive even if APR is higher. On the other hand, if you carry a balance on your credit card, you must look for cards that charge lower APR so that you can save money, but benefits and rewards would be lesser.  You must compare the value of rewards and benefits with the APR to arrive at a decision about what should be good for you.

Compare interest rates of credit cards

Comparing the interest that you are getting with that of other credit cards is the only way to ascertain how the offer is faring. Look at the rewards offered with credit cards because better the rewards higher would be the interest and vice versa. Basic credit cards with fewer rewards would carry lower APR. Again, credit cards meant for people with a poor credit score will have higher APR as compared to cards offered to people with an acceptable credit score.

APR can vary on credit cards as sometimes credit card companies use it to attract new clients by offering 0% APR as an introductory offer or lower than average APR for a limited period after opening the account.  Credit cards that apply to cash advances have higher APR, and there might be penalty APR for missed payments. In addition to the standard APR, you should know about the different rates that credit card charges such as annual fees, late payment charges, etc.

Know your options of getting good APR

Zero percent APR cards and cards that carry low ongoing APR are the two types of APRs that you ill encounter when searching for good APR. Cards with 0% APR typically does not charge interest on purchases and or balance trance transfer for a specified period ranging between 6 and 21 months. This is typically a promotional offer after which the interest payable is above the average rate. However, there is no such relief available if you choose a low ongoing interest which is lower than average, but it can be beneficial in the long run if you carry balance regularly.

Disciplined spending and responsible use of credit cards are the primary ways to avoid paying APR.  When you avoid spending more than you can pay back on time, it paves the way for clearing balances on credit card bills so that it does not attract interest. But if you carry balances, only a credit card with lower than average APR is good for you.

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