What Is APR? A Beginner’s Guide To Understanding Annual Percentage Rates [Infographic]

I’m no fan of Bank of America whatsoever, but they’re doing us a solid here by creating this “What Is APR” Infographic. If you’re like millions of credit card holders, you may not know exactly what APR is or how it’s calculated. Reading this little Beginner’s Guide will be helpful.

You know that people are sometimes afraid to learn stuff that they know nothing about, right? Well if you’ve ever thought acronyms are overwhelming, especially money ones, fear no more. Getting to know what is APR and what it means for all of us is a first step to getting and keeping your financial house in order.

The most basic definition of credit card APR is the rate at which you are charged to “borrow” money on it when spending with it.

 The Infographic below focuses on APR as it specifically concerns credit cards. You’ll learn what sets the APR, which is interesting enough, as well as how banks calculate what you owe.

More importantly, I can’t understate how important it is to understand the different types of APR. Here’s a bit of a synopsis before you dive in to the What Is APR Infographic.

Types of APR

When it comes to credit card Annual Percentage Rates, there are four basic types depending on how you use your card.

  1. Purchase APR: This is the rate you’re likely to use most often. It’s applied to anything you buy on the card.
  2. Cash Advance APR: Be careful if you are using a credit card for some quick cash. They usually charge a high rate when you’re longing for the feeling of paper in your hands.
  3. Penalty APR: Ouch! Generally this is the highest APR. Those jerks! Aren’t you their customer whom they’re supposed to be nice to? They’ll stick you with a stiff penalty for failing to make payments on time or not following the terms and conditions.
  4. Intro/Promo APR: Nice! Lots of cards feature a lower rate for the first 6-18 months. If you have solid credit, you can get a card with 0% interest. Remember, don’t carry a balance if you don’t have to!

 what is apr



  1. I use bankrate,com to see what competing offers are for a variety of loans. They do a good job sorting through the details. I also look at Arkansas’s rates since their usury rates are limited by law.

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