An APR on a credit card basically shows how much interest a balance will accrue over the course of a year. For example, a $1,000 balance on a card with a 25% APR would grow to about $1,250 in 12 months.
The APR on a credit card is not its interest rate, however. When you carry a balance from month to month, interest is assessed on a daily basis. A credit card’s interest rate is therefore its APR divided by 365 (days in a year). So a card with a 25% APR charges interest at a 0.068% daily rate. Furthermore, given that interest charges from one day become part of the balance accruing interest the next day, your effective APR (EAPR) will always be a bit higher than the advertised, or nominal, APR. For example, the effective APR on a card with a 25% nominal APR would be about 28.39%.
You can read more about credit card APRs and how interest works from WalletHub’s guides on the topics.
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