What Is Credit Card APR?
APR — Annual Percentage Rate — is the yearly interest rate a credit card charges on balances you carry from month to month. On a U.S. credit card, APR is a nominal rate: it is not compounded once per year, but converted into a daily periodic rate that gets applied to your balance every day.
How APR converts to a daily rate
Most U.S. issuers convert APR to a daily periodic rate by dividing by 365 (some use 360). A 22.99% APR becomes a daily rate of about 0.063%. That daily rate is applied to your balance to compute one day of interest, and daily interest is added into a running total that appears on your statement.
Purchase APR, cash advance APR, and penalty APR
A card typically has multiple APRs: one for purchases, a higher one for cash advances (usually with no grace period), and often a promotional APR for balance transfers. Missing payments can trigger a penalty APR that stays in effect for months.
Fixed vs. variable APRs
Almost all consumer credit cards use variable APRs tied to the U.S. Prime Rate. When Prime moves, your APR moves too. Your cardholder agreement lists the margin above Prime that determines your rate.
A quick example
On a $5,000 balance at 22.99% APR, one month of nominal interest is roughly $5,000 × 22.99% ÷ 12 = $95.79. Over a year, if the balance stayed constant, interest would be about $1,149.50. Actual statement interest can differ because of daily compounding and the average-daily-balance method.
Frequently asked questions
- Is APR the same as interest rate?
- For most credit cards, APR is the interest rate that will be applied to unpaid balances — there are typically no separate finance fees. On other loan products, APR includes fees and can differ from the pure interest rate.
- Can APR change?
- Yes. Variable APRs move with Prime, and issuers can change your APR after providing advance notice as required by law. Penalty APRs can also be triggered by missed payments.