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Summary
An APR (Annual Percentage Rate) is the way of stating the interest rate you will pay if you carry over a balance, take out a cash advance, or transfer a balance from another card. The APR states the interest rate as a yearly rate. These can at times be easily misinterpreted as there can be several types of APRs. If you carry over a part of your balance from month to month, even a small difference in the APR can make a big difference in how much you will pay over a year.

Types of Annual Percentage Rates
1) Normal purchases. The annal percentage rate that is applied against your credit for normal purchases (like using your credit card at a restaurant or at the grocery store). This is usually the primary APR that credit cards will inform you about.

2) Cash advances. Most credit cards will allow you to pull against your credit line for cash. Usually these cash advances from your credit card come with a higher APR rate.

3) Balance transfers. Some credit cards will allow you to transfer a specific balance from one credit card to another. Usually the benefit to the consumer is going from a higher APR to a lower APR. Often some credit cards will have a deal of their card offering a lower balance transfer APR for a given period of time (and after that period going up).

4) Tiered APRs. This is when different rates are applied to different levels of the outstanding balance (for example, 15% on balances of $1–$1,000 and 18% on balances above $1,000).

5) Penalties. If you are late making a payment, or if you go over your credit balance, your APR may increase. Some credit card companies will specifiy in your card agreement that if your payment arrives more than ten days late two times within a six-month period, the penalty rate will apply. As you can guess, this penalty APR is always higher than than the normal rate.

6) Introductory APR. This is usually a special, lower rate that a credit card will give to help get new customers. After the introductory rate expires a higher rate will apply.

Fixed versus Variable APR
Fixed rate credit cards offer a an APR that doesn’t change, or at least doesn’t change often. The APR on a “fixed rate” credit card can change over time, however, the credit card company must tell you before increasing the fixed APR.

Other credit cards offer variable rate, where the APR changes from time to time. The rate is usually tied to another interest rate, such as the prime rate or the Treasury bill rate. If the other rate changes, the rate on your card may change also. Look for information on the application and in the card agreement to see how often your card’s APR may change.