1. What is APR?

APR (Annual Percentage Rate) is the annual rate charged for borrowing or earned through an investment, including interest and fees. It provides a comprehensive measure of the cost of credit card debt.

2. How Does the Calculator Work?

The calculator uses the APR formula:

Where:

• \( I \) — Total interest paid (currency unit)
• \( F \) — Fees (currency unit)
• \( P \) — Principal amount (currency unit)
• \( T \) — Loan term (years)

Explanation: The equation accounts for both interest and fees relative to the principal amount, annualized based on the loan term.

3. Importance of APR Calculation

Details: APR helps consumers compare different credit card offers and understand the true cost of borrowing, as it includes both interest rates and fees.

4. Using the Calculator

Tips: Enter all amounts in the same currency unit. Principal amount and term must be greater than zero for calculation.

5. Frequently Asked Questions (FAQ)

Q1: How is APR different from interest rate?
A: APR includes both interest rate and fees, providing a more complete picture of borrowing costs.

Q2: What is a good APR for credit cards?
A: Rates vary, but generally under 15% is good for people with excellent credit. Average rates range from 15-20%.

Q3: Does APR include all fees?
A: It includes most fees but may exclude some charges like late payment fees or returned payment fees.

Q4: Why is APR important when comparing cards?
A: It allows direct comparison between cards with different fee structures and interest rates.

Q5: Can APR change after getting a card?
A: Yes, most cards have variable APRs that can change with the prime rate or due to changes in your creditworthiness.