What apr is good

What is an apr video

Today's question is: What is an APR? Ask us your credit questions in the comments below and find your next card at https://www.creditcardinsider.com/ What .

Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Annual Percentage Rate”. If you're like millions .

This question comes around so often we've decided to help anyone watching this easily understand what APR really means and how it effects your loan.

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In this video I go over what an APR is, when a credit card company is allowed to change it and how it effects the interest you pay.

Buying a house and not sure what APR is and how it will affect your mortgage? Watch this video to find out!

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What's The Difference Between Your Interest Rate and APR (annual percentage rate)

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Today's question is: What does it mean when an APR is Variable? Ask us your credit questions in the comments and find your next card at .

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What is the difference between an interest rate and an APR? Why is it important? To put it simply, all APRs are interest rates but not all interest rates are APRs.

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Variable aprs what is a good credit card apr? As of february 2014, the average for fixed and variable cards are 13. What is an apr(c)? Credit cards guides what .

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What is the difference between a mortgage interest rate and an APR? | The Mortgage Minute

What is the difference between a mortgage interest rate and an APR? That is what we are going to take a look at and this week's The Mortgage Minute.


what apr is good

A textbook definition of Annual Percentage Rate, APR, is as follows. Charges imposed on a borrower to obtain a mortgage, expressed on an annualized basis as an interest rate. The APR includes the annual interest rate (AIR), loan fees and points. In the USA the APR is meant to disclose the total cost of borrowing. In Canada the APR is defined in section 6 of the Federal Interest Act in an ambiguous manner and is generally understood to mean effective interest rate (EIR). In Canada, Ontario specifically, the total cost of borrowing, TCOB is calculated as the new EIR because of loan fees and points.

Here is an American APR example (taken from a printed booklet) showing why you should be very careful acting upon "rules of thumb". Which is better? Loan#1, a $100,000, 30 year

loan at 10% plus 3 points or Loan#2, a $100,000, 30 year loan at 10.25% plus 1 point. An image of the actual page of the booklet is shown.

rule of thumb was used. Loan #1 is better for the borrower

using the APR as the yardstick. Loan #1 has an APR of

10.3657% and Loan #2 an APR of 10.3716% which is

greater resulting in more interest being charged.

to understand other names for the various interest rates

used in the industry. Click Here for an explanation.

In loan #1, the APR is nothing more than the new annual interest rate of 10.3657% because of the $3000 (3 points is 3% of $100,000 = $3000). Changing the Principal to $97,000 and recalculating the annual interest rate gave a new rate of 10.3657%. The borrower is making monthly payments based on $100,000 even though the net amount left is $97,000 thus the rate in reality is 10.3657%. Because of the up front $3000

charge the annual interest rate became 10.3657%.

In loan #2, the APR is nothing more than the new annual interest rate of 10.3716% because of the $1000 (1 points is 1% of $100,000 = $1000). Loan#2 is the more expensive loan (because of the APR method) because the APR is 10.3716% which is greater than 10.3657%. So much for the books

generalized rule of thumb that incorrectly shows that Loan#2 is better. In fact Loan #1 is better by $1,257 in less interest after 6 years (comparing accumulated interests).

When the APR is meaningless!

If the calculation of the mortgage's APR is based upon the 360 day year, aka, the bankers year then the APR is of value. A $100,000 loan at 6% using monthly compounding has an interest cost of $500 the very first month. The interest factor is .005 per month and is CONSTANT each month as the year is assumed to be divided into 12 equal 30 day months or 0.5% per month.

If the loan or mortgage is an exact day monthly payment based upon a 365 day year or an exact day monthly payment based upon a 360 day year, ..the APR is not accurate. The algebraic formulas cannot take into account the changing monthly interest factor. Consider a $300,000 mortgage at 6% for 30 years. Taking into account total fees of $3,000, the lender that uses a 365 day year monthly schedule will collect $1,144 more in interest over the 30 years (comparing spreadsheet interest), yet both lenders would quote you an APR of 6.094%. This screenshot demonstrates the point.


what apr is good

What apr is goodWhen looking to apply for a credit card, you will routinely see the term APR. We at GetDebit have a very strong philosophy that APRs should never even matter.

Simply put, you should never willfully carry an unpaid balance on a credit card (with the caveat of low or zero APR balance transfers). This is because the annualized interest rates you’ll end up paying will far exceed any rewards you might hope to earn with the given card. However, this discussion of APRs is still germane, since sometimes we are forced to carry balances (just like Sauron forces the ringwraiths to do his bidding), or are otherwise in a situation where paying interest (sadly) is unavoidable. With that understanding in mind, here is some important information about APRs that everyone should know:

APR stands for annual percentage rate. This figure determines how much money in interest you will have to pay if you don’t pay your credit card bill in full each month. These days, it’s rare to see purchase APRs much below 10%, and the “normal” range is more like 10-20%. Every credit card has its own APR, so it’s a good idea to shop around before you decide which card to apply for.

New credit card holders may not be aware that if they carry a monthly balance on their account they will pay significantly more money back to the bank than what they originally charged. Not only will the cardholder be charged interest for the items purchased that month, but any amount that was not paid that month, including the interest, will be charged interest again. This is in addition to any fees or penalties that a bank may charge over the course of the account. This should only serve to further drive home the lesson: carrying interest-accruing balances on credit cards is a bad idea!

Read the contract and find out if the credit card company charges a fixed or variable APR. A fixed APR will stay the same for as long as the account is open, unless the lender provides written notification of a change within the specified amount time. A variable rate can change at any time and is based on how the interest rates are doing in general. Most APRs are set at the prime rate plus some amount (for example, plus 3%). The prime rate can be found in the business section of any newspaper or online and is the standard by which interest rates are measured. While you should prioritize finding cards with the best rewards first, if you come across two relatively similar rewards cards, then the APR can serve as the tie-breaker. Also note that nearly all credit cards these days are variable rate, and not fixed rate (if you know of a fixed-rate one, drop me a note!).

Again, it’s important to read the fine print on a credit card contract. There are some lenders that will charge different APR rates for different situations. For example:

  • Many lenders have a low introductory APR period that expiries after a certain amount of time. This is typically 90 days to 1 years, though we’ve seen some promotions that run 15, 18 or even 24 months.
  • Cash advances almost always have a higher APR than the standard purchase APR.
  • The default rate for failing to make a payment on time, even if the cardholder is 1 day late, will cause the APR to rise. It is not uncommon to see default rates at 29.9% in today’s market. Needless to say, if you ever default by accident, and the APR jumps up to that level, then you need to immediately do everything in your power pay off the entire balance of that card.
  • Any convenience check issued by the credit card company typically has a higher APR than when a purchase is made directly with the credit card.

The simple rule of thumb is the lower the APR rate is, the better. A good APR rate is the lowest rate you can find. Since interest rates fluctuate, what is considered a good APR will also change over time. People with good credit will be able to obtain lower APRs than people with bad or little to no credit. An average-ish APR these days is around 19.9%, while a good APR is probably closer to 10%. The best APR would be zero, which may be offered during introductory periods.

It’s hard to provide a specific number when discussing bad APR rates. If you are researching a credit card and find a card has a higher APR than other cards you previously looked at, then the higher rate is a bad APR. This could be an APR of upwards around 29.9% or more. Cards with rates this high should be set aside for emergencies only.