What is APR? Understanding Annual Percentage Rate

Find out more about what APR is, what it means for you, and how it can be useful.

What does APR mean?

When banks or other lending providers refer to APR (Annual Percentage Rate), they are referring to the subsequent cost of your borrowing over a year; such as the fees and interest you’ll have to pay as part of your borrowing.

Before applying for a credit card, it’s important to know what APR is, as well as the different types of APR, in order to help you choose what borrowing is best for you, in line with your needs and circumstances.

A simple way to remember APR is:

Interest percent + Fees = APR (Annual Percentage Rate)

What APR does not include:

  • Extra charges — this can include cash withdrawals fees, late payments, or charges for exceeding your credit limit which some lenders may impose.

  • Rates for balance transfers, money transfers, and cash withdrawals which might be higher than a standard purchase rate.

What is a representative APR?

This is the rate offered to the majority of customers (more than 51%) who have taken out the credit card you may be considering.

How can representative APR be useful?

A representative APR allows you to compare different borrowing costs between lenders, and gives you an estimate of what annual percentage rate you could receive.

Please note, thorough research is always advised before applying for any borrowing product, to make sure it’s suitable for your needs beyond knowing just the representative APR.

An example of comparing representative APRs

Card A
Card B
Example Credit limit
Card A £1,200
Card B £1,200
Example Standard Purchase Interest Rate (variable)
Card A 18.9%
Card B 18.9%
Example Annual card fee
Card A £0
Card B £150
Example Representative APR
Card A 18.9%
Card B 31.5%

What is a personal APR?

Some borrowing options will often offer you an APR rate based on your individual personal and financial circumstances, such as your credit score history, in addition to your desired borrowing amount and length of borrowing — this is known as a personal APR.

It’s important to understand that your personal APR may be different from the representative APR you see advertised as it reflects your personal circumstances, which in some cases may be considerably different from other customers who’ve applied for the same borrowing option.

Also please note, if you’re not sure what your personal APR is, you may not find this out until after you’ve applied for a credit card, which could affect your credit rating.

Choosing a credit card with the right APR for you

Whilst APR can help you understand the cost of borrowing, there are lots of other factors to take into account when choosing a credit card, such as potential fees and charges. It’s also important to know that if you pay your credit card bill in full and on time each month, your APR won’t affect you as you won’t pay any interest (unless you’ve used your credit card to withdraw cash).

Some credit cards have higher or lower APRs because they’re designed for specific uses. And sometimes, credit cards with higher APRs come with benefits such as cashback or loyalty points. In this case, you’d have to work out whether having the benefits of a reward card is worth the higher APR.

We have a range of credit cards to compare, such as our balance transfer credit card, 3-year fixed rate credit card, and Co-operative Members credit card.

Payment example

This is an illustrative example for a purchase of £1,000 on your credit card at 18.2% representative APR variable.

If you paid the minimum payment each month.
If you paid £50 each month.
This is the interest you would be charged in year one without any introductory rate being applied.
If you paid the minimum payment each month. £162.69
If you paid £50 each month. £133.39
This is the interest you would be charged in year two without any introductory rate being applied.
If you paid the minimum payment each month. £151.11
If you paid £50 each month. £48.64
How long would it take to clear the balance?
If you paid the minimum payment each month. 25 years, 9 months
If you paid £50 each month. 2 years, 0 months

The above example assumes the following: The transaction takes place on 1 January and you make no further transactions. Your statement is produced on the 1st of each month and you always make the payment on the payment due date each month.

Important information on minimum payments with us

Your monthly minimum payment with us will be one of the following, whichever is the highest amount:

  • 2% of the total balance on your statement (including interest and charges);
  • £5; or
  • the sum of (i) interest for the period from your last statement, (ii) any charges and (iii) 1% of the total balance on your statement (excluding interest and charges).

If you only make the minimum payment each month it will take longer and cost more to clear your balance.

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