Credit Card APR: What Is It and How to Calculate It?

By OneCard   |   January 22, 2024

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We’ve grown accustomed to the ease and convenience that credit cards bring to us when it comes to making our day-to-day transactions. Yet, surprisingly, a lot of us find ourselves struggling to understand terms such as the APR associated with these cards. This blog will explain what an APR on credit cards is and provide you with tips on using credit cards wisely.

What is Credit Card APR?

APR stands for Annual Percentage Rate which is the expense of borrowing money through a credit card. It signifies the annual interest rate you’ll incur when carrying forward a balance at the end of your billing cycle. It can differ among different credit cards.

A low APR suggests that using a certain credit card to borrow money would be relatively affordable, whereas a high APR suggests higher borrowing charges.

Types of Credit Card APRs

Understanding the different types of APRs on credit cards will help you avoid unexpected charges and guide you in the direction of effective credit card usage.

Purchase APR

When an billed amount on a credit card is not fully paid by the due date, interest is assessed at a rate known as the Purchase APR. The majority of transactions done with your credit card will be subject to this form of APR.

Cash Advance APR

An interest rate known as a cash advance APR is charged whenever you withdraw cash using your credit card. [Cash advances on credit cards]( are convenient, but it's important to remember that the APR for it is sometimes greater than the Purchase APR.

Penalty APR

There is a penalty APR if you don't pay your credit card bills on time. It is higher than the normal interest rate. The credit card issuer has the right to initiate the penalty APR if you skip a payment, pay it late, or exceed your credit limit.

Balance Transfer APR

The interest rate levied on outstanding balances transferred from one credit card to another is known as the balance transfer APR. The balance transfer function comes in handy if you are unable to repay your accumulated credit card and wish to take advantage of a different credit card company's lower interest rates.

Introductory APR

An introductory APR is a temporary promotional interest rate that credit card companies provide. This type of APR, which may be used for purchases, balance transfers, or both, is often lower than the standard purchase APR.

How to Calculate Credit Card Interest using APR

Follow the steps listed below to determine credit card interest using APR.

Step 1: Gather Information

Collect your credit card statement, which includes the outstanding balance, APR (Annual Percentage Rate), and the number of days in the billing cycle.

Step 2: Determine the Daily Interest Rate

Divide the APR by 365 (the number of days a year) to calculate the daily interest rate.

Step 3: Calculate the Daily Interest Charges

Multiply the outstanding balance by the daily interest rate to find the daily interest charges.

Step 4: Calculate Monthly Interest Charges

Sum up the daily interest charges for each day in your billing cycle to calculate the total monthly interest charges.

Step 5: Understand the Minimum Payment

Credit card companies require you to make a minimum payment, which may cover only a portion of the interest charges and the principal amount.

Step 6: Review Your Statement

Examine your [credit card statement]( to verify the accuracy of the interest charges and ensure they match your calculations.

Step 7: Make Informed Payments

To minimise interest charges, consider paying off the outstanding balance in full before the statement due date.

Tips on How to Get a Credit Card with Low APR

Here are a few informative tips on how to obtain a credit card with a low APR.

  1. Explore Different Credit Card Options: It’s important to take some time and examine the many credit card options in the Indian market. Look for credit cards that are marketed as having lower APRs.

  2. Compare fees and APRs: Make sure to go for a card with a reasonable annual fee and annual percentage rate (APR).

  3. Maintain a Steady Income and Employment Stability:Your chance of getting a credit card with a lower APR can be improved by showing a consistent source of income and a solid employment history.

  4. Limit the Number of Credit Card Applications: An inquiry is done into your credit history whenever you submit a credit card application, potentially reducing your credit score.

  5. Pay your dues on time:Maintaining a high credit score, as well as avoiding late penalties and high APRs, require timely payment of credit card bills.


In India, obtaining a credit card with a low APR necessitates careful consideration and investigation. You can set yourself up to get a credit card with favourable conditions by being aware of the implications of your credit score, examining several credit card options, negotiating with providers, and keeping a sound financial profile. Remember that smart credit card use can result in a more stable financial future, and getting a card with a low APR is a big step in that regard.


How much is the penalty APR?

The terms and conditions of your credit card agreement, as well as the credit card issuer, affect the penalty Annual Percentage Rate (APR). Penalty APRs in India may be as high as 40% or even higher.

How do I avoid APR on my credit card?

If you carry forward a balance from one month to the next without paying off the entire bill amount, it is inevitable that you will incur APR charges. However, by consistently settling your credit card balance in full and punctually each month, you can potentially minimise or eliminate interest charges.

Does APR matter if you pay on time?

Remember that APR is relevant only when you have unpaid outstanding balance on your card. By paying off your card’s balance by the due date, you can avoid incurring any interest charges.

What is a good APR for a Credit Card?

It also depends on the issuer and the type of card. It is advisable to compare the APRs offered by different credit card companies.


**Disclaimer: The information provided in this webpage does not, and is not intended to, constitute any kind of advice; instead, all the information available here is for general informational purposes only. FPL Technologies Private Limited and the author shall not be responsible for any direct/indirect/damages/loss incurred by the reader for making any decision based on the contents and information. Please consult your advisor before making any decision.