When you're shopping for credit cards, it is important to understand what the annual percentage rate (APR) is.
APR is the interest rate the card lender charges you when you don't pay off your balance in full each month.
Credit card issuers calculate your APR based on how credit-worthy you are, which is called risk-based pricing.
Risk-based pricing implies that the credit card issuer has considered how risky you are as a borrower.
Once your APR is determined, credit card interest rate is applied whenever you don't pay your balance in full.
Lenders may charge you a high APR if your credit history shows that you have a higher risk of defaulting.
The ratio of your income towards debt payments also determines what APR the lender sets for you.
Pay back your credit card balance on time and in full. This will help you avoid shelling out more money toward APR.
The better your credit history looks, the higher the chance of getting a low APR on your credit card.