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 calculates the annualized cost of credit by combining interest and fees relative to the principal amount over the loan term.

3. Importance of APR Calculation

Details: APR helps consumers compare different credit card offers and understand the true cost of borrowing. It's required by law to be disclosed by lenders.

4. Using the Calculator

Tips: Enter all values in the same currency unit. Principal and term must be greater than zero. For credit cards, term is typically 1 year for APR calculation.

5. Frequently Asked Questions (FAQ)

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

Q2: What is a good APR for credit cards?
A: As of 2023, average credit card APR is around 20%. Rates below 15% are considered good, while rates above 25% are high.

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

Q4: Why is term in the equation?
A: The term adjusts the cost to an annual rate, allowing comparison between loans of different durations.

Q5: Can APR be lower than interest rate?
A: No, APR is always equal to or higher than the nominal interest rate because it includes additional fees.