What is APR (Annual Percentage Rate)?

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When you're shopping for credit cards, it is important to understand what the annual percentage rate (APR) is.

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APR is the interest rate the card lender charges you when you don't pay off your balance in full each month.

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Credit card issuers calculate your APR based on how credit-worthy you are, which is called risk-based pricing.

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Risk-based pricing implies that the credit card issuer has considered how risky you are as a borrower.

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Once your APR is determined, credit card interest rate is applied whenever you don't pay your balance in full.

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Lenders may charge you a high APR if your credit history shows that you have a higher risk of defaulting.

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The ratio of your income towards debt payments also determines what APR the lender sets for you.

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Pay back your credit card balance on time and in full. This will help you avoid shelling out more money toward APR.

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The better your credit history looks, the higher the chance of getting a low APR on your credit card.

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