logo-rebrand Skip to main content

What is Annual Percentage Rate or APR?

APR stands for annual percentage rate. It's the amount of interest you pay annually on any money you borrow.

American Express credit cards - card close up

APR is the annual percentage rate of interest you're charged to borrow money. All loan products must show the APR rate so you're able to compare them fairly.

Our repayment calculator shows you:

  • The total cost of your credit card

  • How much interest you'll pay on the debt

  • How quickly you could clear the balance by changing your monthly repayment amount

Credit card calculator

Use the credit card calculator to help work out the costs of owning a credit card.

APR should be advertised on all borrowing products, from credit cards and loans to mortgages.

As part of industry regulations, all lenders calculate APR the same way. To make it easier to compare loan products, APR takes into account any additional fees and how often you're charged interest.

How APR works and how to calculate interest

How APR works is best explained with an example:

If you borrow £1,000 on a credit card with a 12% APR (and you don't 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.

Low APR credit cards

Find a credit card with a low rate of interest to handle your regular payments

Typical or representative APR

APR is advertised as either a 'typical' or 'representative APR'.

Representative or typical APR refers to the rate that at least 51% of those accepted for that product will get. Up to 49% of the remaining applicants may be charged a higher APR.

What you can do to get the best APR

To get the best APR rate, you'll most likely need a good credit score.

Despite the advertised APR, you don't know the exact APR rate you'll get until you apply.

Every time you apply for credit, the loan provider performs a hard credit check. This leaves a mark on your credit file. Lots of applications can make you look desperate for credit. It's unwise to apply for too many credit products at the same time.

In order to get the representative APR, you may have to meet certain conditions and credit score criteria. To see what you could get based on your circumstances, always read the small print first.

Check your credit report before you apply for credit. You may need to improve it to be eligible for the top credit products. You're more likely to be offered the advertised APR if you have a good credit rating.

What's a 'good' APR?

0% purchase credit cards often charge around 18%-20% APR after the interest-free period ends.

Anything lower than 18% is cheap relative to the market trend. Anything dramatically over 20% is towards the expensive side.

Higher rates for credit cards are usually more likely for bad credit and credit builder cards, which can have anything between 24%-50% APR. If you have to get one of these cards, try to repay in full to avoid having to pay these high rates.

Premium credit cards that offer big rewards on your spending often have high APR rates too.

Where can I find low APR credit cards?

There are several low APR credit cards to choose from. Compare them here:

Consistently low APR will help keep your costs down in the long term, so they could be a good choice for sustained borrowing.

Other things to consider when comparing credit cards

APR should not be the only thing to think about when borrowing money or choosing a credit card.

Other things to consider are:

  • Monthly fees

  • Late payment charges

  • Benefits

  • Your credit rating

Take a look at our video on the other costs of having a credit card:

Types of credit cards available to you

Choosing the right type of card for you depends on what you need it for. Check your credit score to make sure your credit file is in the best state possible before you apply.

Use our eligibility checker to see if you're likely to get the card you want. We only perform a soft credit check, so it will not harm your credit rating. Checking your eligibility could reduce the chance of being rejected.

Low APR credit cards are good for steady and planned borrowing, and are useful cards to have in your wallet for the long term.

To borrow without paying any interest, consider a 0% purchase card. The 0% interest is only applicable for a limited period of time. After that, the card reverts to a relatively high APR.

If you're being charged a high amount of interest on existing credit card debts, a 0% balance transfer card could help. Like with 0% purchase cards, the 0% on balance transfers only lasts for a fixed period.

For those planning to use a credit card mostly for shopping, and who know they can pay off your balance in full each month, a rewards or cashback credit card could be a good choice. The APR is often high on these cards, but that should not matter provided you clear the balance each month.

Anyone with a poor credit rating or little credit history may be better off choosing a credit builder card.

You can avoid interest charges while improving your credit score by borrowing responsibility and repaying on time every month. Once your score has improved, consider a different credit card with a lower APR.


APR and AER have completely different meanings.

AER stands for annual equivalent rate. It's the amount of interest you'll earn on your savings and deposits over the course of a year.

The representative AER allows you to compare different savings products

Read more …