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What is APR?
APR is the yearly interest rate on a balance. How a credit-card APR turns a $2,000 balance into a long payoff.
APR is the annual percentage rate: the yearly interest price of borrowing, written as a percent. On a credit card it is the rate the issuer uses to figure the interest added to what you still owe.
Worked example
A $2,000 card balance at 22 percent APR, with a $50 payment, does not fall by $50. Part of the $50 is interest. At 22 percent, a month of interest on $2,000 is about $37, so only about $13 of that payment reduces the balance. The payoff is measured in years, not in $2,000 divided by $50.
Why it matters
People divide the balance by the payment and get a date that is wrong. The APR is why.
Questions people ask
Is APR the same as interest?
APR is the yearly rate. Interest is the dollar amount that rate adds to the balance.
Does a 0 percent APR last forever?
No. It lasts until the date in the offer. After that, the regular APR applies to what is left.
Does paying the minimum avoid interest?
No. The minimum usually includes the interest and a small piece of the balance. Interest stops when the balance is paid in full, on time, after the grace period.
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