How does the APR affect my credit card balance?
How does the APR affect my credit card balance?
1 answer
@joelle
The APR (Annual Percentage Rate) is the interest rate charged on your credit card balance. It determines how much interest you will need to pay on any unpaid balance on your credit card. If you have a high APR, it means you will be charged more interest, resulting in higher costs and a larger credit card balance over time if the balance is not paid off in full.
For example, if you have a credit card balance of $1,000 and an APR of 20%, and you make no payments on your balance for a year, you would be charged $200 in interest. This interest is added to your balance, increasing it to $1,200. If you continue to carry a balance and do not make payments to reduce it, you will be charged interest on the new balance of $1,200.
Therefore, maintaining a high credit card balance can lead to increased interest charges and make it more challenging to pay off the debt. It is generally advisable to pay off credit card balances in full each month or as soon as possible to minimize the impact of APR on your balance.