What Is Credit Card APR

APR (annual percentage rate) on a credit card is the yearly cost of borrowing expressed as a percentage. Card issuers use it to calculate interest on your revolving balance. The rate is disclosed in your card agreement and on your statement. Use the Credit Card Payoff Calculator to see how your APR affects your payoff timeline.

How APR Is Applied

Interest is typically applied monthly. The monthly rate is usually APR divided by 12. For example, 18% APR means 1.5% per month. Each billing period, the issuer multiplies your balance (or average daily balance) by that rate to get the interest charge. That charge is added to your balance, and your payment is applied. So a higher APR means more of each payment goes to interest and less to principal, extending payoff and increasing total cost.

Variable vs Fixed APR

Many cards have a variable APR tied to an index (e.g. the prime rate) plus a margin. When the index moves, your APR can change. Fixed APR does not change with the index but can still change with notice. For payoff planning, use your current APR; if it changes, rerun the calculator.

Practical Takeaway

APR is the annualized cost of borrowing on your card. It directly drives how much interest you pay each month and how long it takes to pay off a balance. Use the Credit Card Payoff Calculator with your balance and APR to see how different payment amounts change your payoff date and total interest. For how that interest is calculated month by month, see how credit card interest is calculated.