When is APR charged on credit card? This can be a question for many people. People tend to think that using a credit card is the easiest way for them to meet their needs. But, the reality is that there are still many people who are surprised by the high cost of credit card bills.
Even when bank agents have provided explanations regarding how credit cards work, there are many things we miss. If you intend to open a credit card, then you need to know when is APR charged on credit card?
Little Things to Know About Credit Card
Imagining you shop lightly using a credit card, that’s a fun thing. But this happiness can make you forget that you may have many other credit card bills.
Before deciding to register for a credit card, you need to understand the scheme and how the credit card itself works. That will make you wiser in choosing which bank, and how to use it so that your interest rates don’t get higher.
What Does APR Mean?
Credit card users may be familiar with the term APR, or Annual Percentage Rate. This is a term to refer to the interest rates charged by credit card users. The calculation of the interest rate that you must pay if you apply for credit. A credit includes transactions and periodic borrowing.
This APR probably won’t be a big problem for those who always pay their credit card bills on time. But for some people who can’t pay it off, and are often late in paying credit card bills, it’s a big deal.
The high and low APR depends on the history of credit payments, as well as the bank in question. The higher the APR percentage, the more you have to pay, and vice versa.
APR is different from APY (Annual Percentage Yield), which is the additional interest rate you get from saving. You may have to pay more if your APR is higher, but if your APY is higher your interest rate will increase.
How Does APR Work on Credit Cards?
Before discussing when is APR Charged on credit cards, you need to understand how the APR itself works. This is the actual yearly cost loan that you need to pay for all types of loans, including interest rates and some arrangement fees. Each credit card has different provisions regarding calculating APR.
Not only are the APR values different, but several conditions will also cause customers to be burdened with different billing fees.
Credit card users have the opportunity to pay representative APR only, in which the bill includes only mandatory bills. However, in other conditions, a credit card holder can also have mandatory bills and other additional fees, which are included in the personal APR.
This additional fee is included in the type of APR that is most commonly incurred by credit card holders. But before that, here’s how to calculate APR.
When is APR Charged on Credit Cards?
In case, you shop using a credit card of 1,000,000, and your credit card APR percentage is 22.9%. This percentage will be divided into twelve months at 1.9% per month. So that your bill will be subject to that much additional interest rate. Your invoice due date is the 20th of each month.
Based on the example above, if you pay the bill in full before it is due in the following month, then your APR is 0%. In other words, you are not charged to pay the APR.
But if you pay your bill with a minimum value, or less than 400,000, and you make the payment before it’s due. You will be charged an APR fee of 1.9% of the remaining debt, which is 600,000.
If under certain conditions you cannot pay credit card bills at all. In the end, you will be charged a bigger bill the following month. That includes a compulsory fee, an APR of 1.9% of 1,000,000, and additional fees in the form of late fees.
As a result, the greater you pay off your bills in a faster period, the lower the APR value charged. Conversely, if you take too long to pay off your bills, it will make the bill burden even higher. At the end of the year, you may experience bills that are too high.
Type of APR on Credit Card
By understanding when APR is charged on a credit card, and understanding how it works, credit card owners will be able to manage their money properly. Another thing that also needs to be considered before using a credit card is understanding which types of transactions affect the APR.
1. APR on Purchase Transactions
This APR is the most we find in every use of a credit card. This is the percentage of bills that appear after making any purchase transaction. You will probably have an APR whose value increases with high credit card use.
2. Cash Withdrawal APR
If you use a credit card to make a cash withdrawal transaction, then the card is also charged with the APR. Not only cash withdrawals at ATMs, you may also get an additional APR fee when cashing a money check.
3. APR on Balance Transfer
This is an additional fee that will occur if there is a transaction used for balance transfers. The high or low APR for this balance transfer depends on each company or bank that issues the credit card. Besides that, the type of balance transfer can also determine the value of the APR.
When is APR Charged on Credit Card: Get Your Best Balance!
After reading the reviews and the time when is APR charged on credit card, we hope you can maintain a balance on credit card transactions. So that whenever you receive a credit card bill, the amount will not be too large and excessive. Initially, the cost of the bill may not be too big, but in a year you will probably feel when the value becomes significant.
Therefore, to get a balance between your credit and debit cards, you must choose which bank offers a balanced APR and APY. After that, all you need is to manage your money wisely, for example, spending money on something important and useful.