What is APR?
Inform your credit card decisions with a deeper understanding.
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APR stands for Annual Percentage Rate.
It’s important to understand your APR, because it tells you how much your borrowing will cost you over the year as a percentage of the money borrowed.The higher the APR is, the more expensive it’ll be for you to borrow.
The lower it is, the less expensive it’ll be for you to borrow.APR includes the interest you’ll pay on your borrowing as well as other fees you can expect to pay like any application fees or standard card fees. But it doesn’t include extra charges, such as fees for cash withdrawals or late payments.
When you see the word ‘Representative’ used before APR, this means it’s the rate that most people will receive. This rate isn’t guaranteed for everyone, but it is a useful way to compare different cards from different providers and the rate offered depends on an assessment of your personal circumstances.
Representative APR calculations all follow a set of assumptions which we can show you with help from Saffia.This Representative APR example assumes that Saffia gets a new credit card.
On day 1 of using her new card, Saffia makes a card purchase of £1,200. And over the next year, she pays it back in equal payments plus any interest charged, with no other spending. However, depending on the credit card she chooses, the cost of this borrowing could vary.
For example, Saffia might pick credit card A.
This offers her a standard purchase interest rate of 18.9%, with no annual card fee. As a result, the Representative APR is 18.9%.On the other hand, if she selects credit card B, her standard purchase interest rate is still 18.9%, but with an annual credit card fee of £150. The extra fee is factored into the Representative APR of credit card B, which is higher at 31.5%.
This means that using credit card B will cost Saffia more. Although, it’s possible she may get other benefits with this card.
Thanks to Representative APR, we can quickly and easily see the cost differences between these two cards.
But remember after all this, you should still do comprehensive research before picking a credit card that’s right for you.
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Visit lloydsbank.com/creditcards for more information on picking the right card.
What does APR include?
Interest
In general, most APR calculations use the interest rate for card purchases.
Fees
The cost of other standard charges. For example, any application fees or annual card fees.
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APR
Annual Percentage Rate. An estimate of your cost of borrowing.
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Example |
Credit limit |
Standard Purchase Interest Rate (variable) |
Annual card fee |
Representative APR |
|---|---|---|---|---|
ExampleCredit Card A |
Credit limit£1,200 |
Standard Purchase Interest Rate (variable)18.9% |
Annual card fee£0 |
Representative APR18.9% |
ExampleCredit Card B |
Credit limit£1,200 |
Standard Purchase Interest Rate (variable)18.9% |
Annual card fee£150 |
Representative APR31.5% |
Frequently Asked Questions
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When you borrow money, you pay interest for the service of borrowing.
Representative APR gives you an estimate of the yearly cost of this borrowing including any standard fees (e.g. Annual Card fees).
The AER or Annual Effective rate (sometimes referred to as Annual Equivalent Rate) is the actual rate for the amount you have borrowed including interest accrued over a 12 month period. The AER is a compounded interest rate, meaning it also includes the impact of accruing interest on interest already billed.
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No, the rate advertised is the rate that at least 51% of applicants will be offered. Most card issuers offer a range of APRs, and the actual rate you’ll be offered will depend on your credit score and financial history.
Many credit card issuers provide an eligibility check that helps you find out what card and APR you are likely to be accepted for. At Lloyds Bank, our simple credit card eligibility checker, One Check, only takes about 5 minutes to complete.
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No. Besides APR, there are plenty of other factors to take into account.
For example, the fees you might be charged – these may vary between credit card issuers.
How you intend to use your credit card may also change. For example, you may have taken out a credit card to consolidate your card debt and the balance has been paid off. Now you’d like to make a purchase or put your day-to-day spending on a card. Swapping your card means you can have a new credit card that meets your current needs.
It’s best to take the time to research your choice thoroughly.
Where next?
Important legal information
Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065 Lloyds Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278.Visit the Lending Standards Board website
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How much we lend and the issue of a credit card depends on an assessment of your circumstances. You must be 18 or over and a UK resident to apply.
Terms and conditions apply to all Lloyds Bank credit cards benefits. Full details will be sent with your card. After each introductory period ends you will be charged at the appropriate standard rate.
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