APR – What’s That Mean, Anyway?
APR – it’s a term that we commonly see on many financial documents, but what’s it mean and why does it matter? Let’s find out.
What Does APR Stand For?
APR stands for Annual Percentage Rate.
According to Nerdwallet, APR and Interest Rates on credit cards are the same.
For other loan products, the APR reflects the real cost of the loan. This is more common on mortgages where there will be processing fees, or other items that will be included in the APR.
For credit cards, if you are evaluating a debt consolidation loan versus paying off credit cards, you will want to evaluate the APR on each product. Ideally, the APR on the consolidation loan will be lower than the APR on the credit card, which would indicate you may save money by using a debt consolidation loan. These consolidation loans can have origination fees, which is why it’s important to compare the APR on both products.
Since the APR has been required since The Truth and Lending Act any lender — credit card company or otherwise — is required to show you the APR.
Credit cards may have different APRs for cash advances versus purchases, but the one you will generally be most focused on is the APR for Purchases (charged on anything you purchase on your credit card).
Remember, always compare APRs to best understand the total cost of the loan product.