1. What is APR?

The Annual Percentage Rate (APR) represents the yearly cost of borrowing money, including interest and fees, expressed as a percentage. It provides a standardized way to compare credit card costs.

2. How Does the Calculator Work?

The calculator uses the Credit Karma APR formula:

Where:

• \( interest \) — Total interest charged during period
• \( fees \) — Any additional fees charged
• \( balance \) — Average daily balance or principal amount
• \( days \) — Number of days in the billing period

Explanation: The formula converts periodic charges into an annualized rate by accounting for the time period and scaling to a percentage.

3. Importance of APR Calculation

Details: Understanding your APR helps you compare credit card offers, estimate borrowing costs, and make informed financial decisions about credit usage.

4. Using the Calculator

Tips: Enter all values in their respective units (dollars for amounts, days for period). Ensure balance and days are positive numbers for accurate results.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APR and interest rate?
A: APR includes both interest rate and fees, giving a more complete picture of borrowing costs.

Q2: What is a good credit card APR?
A: As of 2023, average APRs range from 15-25%. Rates below 15% are considered good, while rates above 25% are high.

Q3: How often does APR change?
A: Variable APRs change with the prime rate. Fixed APRs may change with 45 days notice from the issuer.

Q4: Does APR affect my credit score?
A: No, but high APRs may lead to higher balances which can impact credit utilization and thus your score.

Q5: Can I negotiate my APR?
A: Yes, especially if you have good credit. Contact your card issuer to request a lower rate.