APR stands for annual percentage rate that is levied on the borrowed money. It is a single number expressed in percentage form that includes all the charges and associated with the transaction over the loan term. According to the credit law, it is mandatory for all credit card companies to declare their APR to their customers before any kind of deal gets finalised. The factors on which the APR get calculated are:
1. The loan amount.
2. The period of loan.
3. The EMI amount.
4. The applicants credit history and credit score.
Besides the above, any kind of default or late repayment entitles the bank to increase the credit APR in the next billing cycle.
Steps for getting a good APR on credit cards
The APR charges vary from bank to bank. A low APR rate can be availed with a good credit history and credit rating. Lower the APR, greater will be the savings. A few steps if followed can help in availing a lower APR.
1. Many loan institutes have pre stated APRs’. There are online sites where one can avail and compare these APRs’ before contacting the bank.
2. Read carefully the terms and conditions attached with the APR calculation of the particular bank. Some banks include transaction charges in their APR while others, who in order to promote their organisation, advertise lower APR rates excluding the charges. Many financial institute offer zero percent APR as an introductory offer to its new customers. One must be careful of the rates as there are chances that the APR rate charged after the introductory period gets over, is much higher than the other banks.
3. The change in the APR rate in case of late payment or missed payment must also be checked properly. To avoid increased APR rates, pay the monthly instalments before the grace period ends.
4. Annual fees, over limit and late payment charges are some of the other facets of the credit loan that must be counted before taking in to account the APR rates of the bank. It would be wise to select a card with no annual fee and a higher APR rather than a card with a huge annual fee.
As mentioned earlier, the APR rates are variable and can be bargained for. An applicant with good repayment history and sound financial background will have greater chances of bargaining for a low APR rate credit card.