What does APR stand for in credit card terms?

APR stands for Annual Percentage Rate in credit card terms.

It expresses the yearly cost of borrowing, shown as a percentage of the outstanding balance. Although stated annually, credit card interest is commonly calculated using a daily periodic rate, often by dividing the APR by 365, and then applied to balances according to the card agreement.

APR is not always the same as the interest actually paid over a year. A card may have separate APRs for purchases, balance transfers, and cash advances, while promotional offers can temporarily reduce one of them to 0%. Fees may also affect a loan’s APR, but credit card disclosures typically distinguish interest rates from fees.

A common mix-up is confusing APR with APY, which reflects the effect of compounding on money deposited or invested. For credit cards, a lower APR generally means lower interest costs when a balance is carried, but paying the statement balance in full by the due date can avoid purchase interest under the card’s grace-period rules.