It’s important to read the fine print when you’re deciding which card makes the most sense for your budget and your lifestyle. If you use credit responsibly, you can avoid paying hundreds — or even thousands — of dollars in interest! So, familiarize yourself with this term while you shop around for a new card: APR.

What is an APR, Anyway?

When you buy something with a credit card, you’re basically promising to pay for that item in the future. If you don’t follow through on that promise, you’ll be charged interest by the credit card company. When you apply for a credit card, the company will disclose to you the APR, or Annual Percentage Rate. That’s the interest rate you’ll pay if you don’t pay your credit card in full and on time on purchases. The interest rate on a card varies, but it usually varies between 10% and 20%. While it’s called an annual rate, you’re actually charged interest each day your balance goes unpaid past the due date.

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How Is My Annual Percentage Rate Determined?

You’re probably wondering why some cards offer you a lower APR than others. APR is based on a number of different factors, like the type of card and your credit score. Most likely, the lower your credit score, the higher the interest rate. Also, different kinds of transactions can lead to different APRs. If you use your card for a cash advance, in some cases the APR on that transaction is higher because it’s considered riskier by the credit card company. Retail purchases usually have lower APRs than cash advances. How can you get a lower rate? Maintain a higher credit score by paying your bills in full on time and paying off debt.1

What About All Those Introductory Offers I Get in the Mail?

Credit cards often offer enticing introductory APRs that, when carefully considered, can help you keep your interest rate low. For up to the first 18 months you have the card, you might be given a promotional APR that’s lower than the typical rate — and could even be 0%. Once the promotion expires, you’ll be charged a higher rate. The introductory rate can be a great way to save on interest, but be sure to know when they rate is going to increase — and pay your balance accordingly.

What Happens if I Pay Late or Carry a Balance?

The smartest thing you can do for your credit is make timely payments. Otherwise, you can incur late fees, an increase in your interest rate, and a ding to your credit score. If you’re in the introductory rate period, your interest rate might revert to the default rate, which is the highest interest rate charged on that card. That would wipe away any of the benefits of that introductory rate.

What about if you carry a balance? The good news? Paying down your balance on a regular basis shows lenders you can stick to a repayment schedule. But a high credit card balance can negatively affect your credit score because it increases your credit utilization ratio. The most responsible way to build credit over time is to pay your cards in full each month.



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Your FICO® Credit Score and key factors are based on data from TransUnion and may be different from other credit scores. This information is intended for and only provided to Primary cardmembers who have an available score. See about the availability of your score. Your score and key factors are available on and your score is provided on statements. You will see up to a year of recent scores online starting when you become a cardmember. Discover and other lenders may use different inputs, such as a FICO® Credit Score, other credit scores and more information in credit decisions. This benefit may change or end in the future. FICO is a registered trademark of the Fair Isaac Corporation of the United States and other countries.

Discover Financial Services and Fair Isaac are not credit repair organizations as defined under federal or state law, including the Credit Repair Organizations Act. Discover Financial Services and Fair Isaac do not provide "credit repair" services or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating.

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