 TITLE: What Is APR and How Does It Affect Me? CONTENT: How Is APR Calculated for Credit Cards?\n---------------------------------------\nCredit cards can have more than one type of APR, and the different rates are tied to what you do with the card. Before we get into the details of each type of APR, let's go over how credit card companies calculates an APR in the first place.\n### How Your Credit Card APR and Interest Charges Are Determined\nCredit card issuers sometimes offer one APR for everyone who gets approved for a credit card, but most of the time, they provide a range instead. The APR you qualify for is based on your creditworthiness.\nThis concept is called risk-based pricing—the APR you qualify for is based on how risky the card issuer considers you to be. If you have excellent credit and a strong financial profile, for instance, you may qualify for the card's lowest interest rate. But if your credit score is low among qualified borrowers, your APR may end up on the higher end of the spectrum.\nOnce you know the APR, you can break it down to understand how much interest you'll pay on a monthly basis. At the end of each day, your credit card issuer will calculate your daily interest rate by dividing your APR by 365.\nFor example, if your interest rate is 20%, your daily interest rate is 0.05479%. So if you have a balance of $1,000 on the first day of your statement, it'll become $1,000.55 at the end of the day with interest. If you don't make any new purchases on day two, your balance will increase to $1,001.10 due to daily compounding interest. As you make purchases throughout the month, your daily interest will continue to compound each day until the statement closes.\nOf course, that doesn't mean you'll actually end up paying credit card interest (more on that in a bit).\n### Types of Credit Card APRs\nWhen you look at your credit card agreement, you may see a handful of different APRs. Here are some to know about:\n*   **Purchase APR**: This is the rate that applies to purchases you make with the card. Keep in mind, though, that if you use your credit card to make a purchase and pay off the full balance during the grace period, you can avoid paying interest.\n*   **Balance transfer APR**: In many cases, the balance transfer APR is the same as the purchase APR. However, balance transfers typically start accruing interest immediately, and there's no grace period like with purchases. Keep in mind, too, that if you move a balance from one card to another, you'll likely be charged a balance transfer fee, which is typically between 3% and 5% of the balance amount transferred. This fee isn't included in the balance transfer APR.\n*   **Introductory APR**: Some credit cards offer an introductory low or 0% APR to give you an incentive to apply for the credit card and to reward you for using it. This low promotional rate for all new purchases, balance transfers or both is available for a set amount of time—at least six months but sometimes as much as 21. When the introductory period ends, the APR will increase, in turn increasing the cost of using the credit card. Your APR may also increase if you trigger the penalty APR by violating any of the terms of the credit card agreement, such as failing to pay on time or paying less than the minimum monthly payment amount.\n*   **Cash advance APR**: When you use your credit card to withdraw cash from an ATM, this APR will apply to the amount you withdraw. Typically, cash advance rates are higher than purchase and balance transfer rates. And like balance transfers, as soon as you take the cash advance, you will begin accruing interest on the amount.\n*   **Penalty APR**: Many credit card agreements include a penalty APR that the company will charge if you fall behind on payments by 60 days or more. With business credit cards, however, you can trigger a penalty APR if you're late by just one day (though terms vary from card to card). All the balances on your account will be subject to the penalty rate, which is often much higher than other interest rates.\n### Where to Find Your Credit Card's APR\nInformation about the various interest rates and fees associated with a credit card can be found in the \"Schumer box.\"\nThe Schumer box was created through legislation spearheaded by now-U.S. Senator Charles Schumer to provide consumers with a simple and standardized display with all the pertinent rate and fee details about a credit card.\nIn 2009, the Credit CARD Act expanded the concept of the Schumer box and added a requirement that credit card companies provide clear information on all credit card statements. This includes how much you'll pay in interest and fees if you opt to pay only the minimum payment amount due every month.\nWhen you're comparing credit cards, you can typically find the Schumer box by clicking on a link from the card's landing page that says something like \"pricing and terms\" or \"rates and fees.\" You'll also get a copy with your cardholder agreement after you've been approved. END