What is 24% APR on a credit card? Is it Too High For My Credit Card?
What is 24% apr on a credit card: The APR on your credit card is the annual rate at which your card issuer will charge you interest whenever you carry a balance. The higher a credit card’s APR, the more interest you’ll pay. If you always pay your bill in full and you never carry a balance, then APR and interest charges won’t affect you.
Types of credit card APR
Most credit cards have different types of APR that vary depending on the issuer and how you use the card.
Introductory APR or promotional APR is a lower rate offered for a limited time. It might apply to specific transactions, such as new purchases or balance transfers only. When the introductory period ends, the APR may adjust to a higher rate.
Purchase APR is the rate applied when you make a new purchase on a card.
Cash advance APR is the rate for using a card to withdraw cash from a bank or ATM. It’s typically higher than other APR types and doesn’t come with a payment grace period, so I don’t recommend using your credit card for cash advances.
Balance transfer APR is the rate applied when you move an existing debt balance on another credit account to a different card. Transferring debts from a card or loan to a lower-rate card can be an excellent strategy to eliminate debt faster.
Penalty APR is the rate applied to your card account when you violate your agreement by not making payments on time. After being delinquent for 60 days, the issuer can charge up to 35% APR on your existing balance. However, this rate must be removed after you pay on time for six months.
What Is 24% Apr on a Credit Card
If you have a credit card with a 24% APR, that’s the rate you’re charged over 12 months, which comes out to 2% per month. Since months vary in length, credit cards break down APR even further into a daily periodic rate (DPR). It’s the APR divided by 365, which would be 0.065% per day for a card with 24% APR.
The formula for your credit card bill is the daily rate multiplied by your daily card balance, which is then multiplied by the number of days in the monthly billing cycle. It’s important to note that you’re only charged APR on credit card charges when you carry a balance from month to month.
If you pay off your balance in full by the statement due date, you only pay what you charged and avoid all interest charges. That’s the best way to use credit cards, so I strongly recommend it! The time between making a credit card charge and your statement due date is called the grace period. You typically have about 20 days in each billing cycle to float new purchases.
How APR works & Steps to Calculate
If you borrow £1,000 on a credit card with a 12% APR (and you do not repay any of the debt), it’ll cost you £120 in interest over the course of a year. The APR is typically added to your debt on a monthly basis. To find the monthly interest rate, divide the APR by 12. The monthly rate on a 12% APR is 1%. If you owe £1000, you’ll be charged £10 interest each month.
The longer the period over which you spread your repayments, the lower the monthly cost…but the higher the overall interest paid.
Is 24% APR on purchases high for a credit card?
Yes, with current interest rates it is quite high for a standard-issue Card. If it is a Store Card, that is relatively cheap; the average store card is between 31–39% APR.
Tips for Saving Money on Interest
You won’t have to pay any interest if you pay your credit card bill in full by its due date. So the best way to save on interest is by never carrying a balance.
You can also keep interest payments down by carrying as low of a balance as possible. That could make it a good idea to make partial payments on your credit balance throughout the month. An additional payment, even a small one, lowers your average daily balance.
Set up an automated minimum payment on the first day of your credit card’s monthly billing cycle. That can guarantee an on-time payment, while also lowering your next month’s interest charges.