1. What is APR?

APR (Annual Percentage Rate) represents the true yearly cost of borrowing money, including interest and fees. It's a standardized way to compare credit card costs.

2. How Does the Calculator Work?

The calculator uses the APR formula:

Where:

• \( total\_fees\_and\_interest \) — Sum of all interest and fees charged during the period ($)
• \( balance \) — Average daily balance or principal amount ($)
• \( days \) — Number of days in the billing period
• 365 — Days in a year (used for annualization)
• 100 — Conversion to percentage

Explanation: The formula calculates the daily rate first, then annualizes it and converts to percentage.

3. Importance of APR Calculation

Details: Understanding APR helps consumers compare credit card offers and understand the true cost of carrying a balance. Lower APRs mean less interest paid over time.

4. Using the Calculator

Tips:

• Include all fees (annual fees, cash advance fees, etc.) in the total fees amount
• Use your average daily balance for most accurate results
• Count the exact number of days in your billing cycle

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 APR for a credit card?
A: As of 2024, average APRs range from 15-25%. Below 15% is considered good, while above 25% is high.

Q3: Does APR include penalty fees?
A: Typically no - APR calculations usually exclude late payment fees and penalty rates.

Q4: How does compounding affect APR?

This calculator shows simple APR. Actual costs may be higher with daily compounding interest.

Q5: Why does my APR seem higher than advertised?
A: Cards often advertise "purchase APR" but other transactions (cash advances, balance transfers) may have higher rates.