What is APR - (Annual Percentage Rate)

APR stands for annual percentage rate. It’s a calculation that allows consumers to benchmark the cost of borrowing. In short the lower the APR the better. There are two sections on this page.

• What is APR

• APR Calculation Table

• Credit Cards and APR

APR takes into account the amount of interest you pay and any other fees charged by the provider such as fees for setting up the loan or credit agreement. It also takes into consideration when and how often interest and charges must be paid.

When comparing APR’s make sure you compare like for like and ignore the monthly interest advertised as they are lower can mislead you. APR’s are often based on the perceived risk of the lender, so if you’ve had past credit difficulties you may have to pay a higher APR. With secured loans the APR can be affected by the amount your borrowing in comparison to the value of the home its secured against.

Use these tables to see how much you will actually pay back when you take out credit of £1,000 or £100 (to the nearest pound). Find the APR on the left hand side and follow it across to the number of years of the loan.

For example if you borrow £1,000 at an APR of 25% for 5 years you'll pay back £1,675 (that's an extra £675 in interest). If you borrow £100 at an APR of 30% for 3 years you'll pay back £146 (an extra £46 in interest payments).

Use the payment calculator at the bottom of the page to work out the cost of loans of different amounts.

Remember - the lower the APR the less you'll pay back in interest

Applying this rule to Credit card Providers.
Browsing the market for credit cards can be very confusing, now only do they (providers) offer different goodies, they also offer different APR 's on their borrowing rates. This can be good or bad dependant on your situation. Below we will see some examples of current credit card deals on the market and explain why they might be good or bad depending on your situation.

Situation 1 (0% balance transfer)
Based on a short term card used to transfer debt from another card to the new card. Used by many people these days to transfer debt and in the short term, save paying any interest on the loan amount. Remember all credit card transactions are in effect "loans".  As a rule companies that offer 0% Balance Transfer rates have slightly higher APR% , they are hoping you will lapse your payments or forget what the card was for initially and they will then claw back the interest payments over time.

The EggCard in the above table looks the best deal on the market, however you may need to consider other things, are you going to use the card after the 6 months free balance transfer, would you benefit from the 1% cashback. There are many issues to consider, we hope the above table answers a few questions.

Situation 2 (Purchase Card)
The real reason to have a credit card for 95% of us is the convenience, knowing we can visit a store and use our credit card to make purchases.  It maybe the end of the month and money might me tight, knowing we have the freedom to spend when we might not have the money in our banks is a worry off most peoples mind.  If you use a credit card on a regular basis, then you must consider a low Apr credit card.  There are many cards today which offer good deals and low apr's on there cards.
Most people consider having multiple credit cards, so maybe an Egg Card and a Capital One card might be the ideal choice.

If you spend heavily and rely on your credit card to hold debt for you , then the Lloyds card looks like the best card for you.  You need to be aware of the £30 annual fee. If you do spend heavily and are not a customer who likes to pay the balance off their cards straight away, then the Lloyds CreateCard might be the credit card for you.