What is credit card APR?

APR stands for annual percentage rate and is the cost of credit when using a credit card. For example, if a user carries a balance of $1,000 on their credit card, the cost of borrowing that money is reflected in the interest rate.

A credit card interest rates can be fixed or variable. If a rate is variable, it is usually based on a market index, such as Prime rate. The APR a borrower can qualify for depends on several factors, including their credit history.

Credit card issuers often offer introductory interest rate for a certain period, such as 3 or 6 months. Some issuers offer an introductory period for purchases only and others for purchases as well as balance transfers.

If a cardholder defaults on his or her payments, the interest rate can skyrocket, as outlined in individual credit card agreements. This is why it is important to make at least the minimum monthly payment.