How does Creditcards APR works?

monmon
in Business & Finance

Hi,

I'd like to know how APR works.

Hipotetically, let's say you have a balance of 3000 and APR of 10%,

but is just a balance, you are not buying anything on that card ,

you are just paying off.

Does that mean every month there is an extra 10%?

Thanks!

Comments

  • ed-atuned-atun

    The APR is a way for you to know the "true" interest rate on a loan ( credit card, home mortgage, car loan). If the interest rate is 9% on your credit card, but your card has a $300 annual fee plus $200 application fee, then the APR is 9.6%. It is your warning that you are paying more than the basic 9% interest.

    If the APR and the true interest rate on your card is 10%, you will be paying $300 a year in interest on the $3,000 outstanding. The interest payment would be $25 a month.

    There is not an "extra" 10%. Just the 10% that you pay for the use of the card.

  • smokies-hikersmokies-hiker

    This link is the best explanation I can find. It does a much better job than I could have done!

    http://www.ehow.com/how-does_4925318_apr-work-cred...

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