What does APR stand for on a credit card offer or loan paper? It means Annual Percentage Rate: how much borrowing costs over a year, shown as a percentage. A lower APR means the loan costs less over time; a higher one means it costs more.
Lenders in the United States must show the APR before you sign, under a federal law called the Truth in Lending Act. The point is to give borrowers one number they can use to compare offers from different lenders on equal terms.
Quick facts
The APR acronym in three plain words
- Annual: measured over one full year, even if you pay monthly.
- Percentage: written as a share of the amount borrowed, such as 7 percent.
- Rate: the speed at which cost builds up.
Put together, the apr meaning is "how much this borrowing costs per year, as a percent of what you owe." It is said letter by letter, "A P R," which makes it an initialism. In print it is always capitalized and usually has no periods.
What does APR stand for in finance, compared with the interest rate?
For many loans, the APR and the interest rate are two different numbers. The interest rate is the basic charge for borrowing. The APR adds in certain required fees, such as loan origination fees or mortgage points, and spreads them over the life of the loan. That is why a mortgage APR is often a bit higher than the rate in the headline.
| Number | What it includes | Best for |
|---|---|---|
| Interest rate | The cost of borrowing only | Figuring your monthly payment |
| APR | Interest plus certain lender fees | Comparing one loan offer with another |
On a credit card the two are usually the same, because cards rarely carry the kind of upfront fees that APR folds in.
APR on a credit card statement
A single card can list several APRs, each for a different kind of balance:
- Purchase APR: for things you buy with the card.
- Balance transfer APR: for debt moved over from another card.
- Cash advance APR: for cash taken out with the card, often higher, and charged from day one.
- Penalty APR: a higher rate that can apply after late payments.
- Introductory APR: a low or zero rate for a set number of months.
From a card statement: "Purchase APR 22.99% (v)." The v means variable: the rate is tied to a benchmark and can move up or down. If you pay the full statement balance by the due date each month, you usually pay no interest on new purchases at all.
Card companies figure the daily charge by dividing the APR by the days in the year. That daily slice is added to your balance, which is why carrying a balance gets costly.
APR vs APY
These two look alike but answer different questions. APR is mostly about what you pay when you borrow. APY, annual percentage yield, is about what you earn when you save, and it counts compound interest, interest earned on past interest. Banks tend to show APY on savings accounts and APR on loans, since each number looks better for its own purpose. When comparing, match like with like: APR with APR, APY with APY.
Reading APR in real life
- "The car loan has a 6.5% APR for 60 months."
- "I moved my balance to a card with a 0% intro APR."
- "Your APR may change if the prime rate changes."
- "Compare the APR, not only the monthly payment."
A lower monthly payment can hide a higher total cost if the loan runs longer. The APR helps you see past that.
Other places the letters appear
With a period, Apr. is the standard short form of April on calendars and dates, so "Apr. 15" has nothing to do with interest. In finance writing, APR sits among many other letters like FICO for credit scores and HELOC for a home equity line of credit. More are listed on the business acronyms page.
Questions people ask
What does APR mean on a credit card?
It is the yearly interest rate charged on balances you carry past the due date. Cards may list different APRs for purchases, cash advances and balance transfers.
Is a lower APR always better?
For borrowing, a lower APR means a lower cost for the same loan length. Still, compare the length of the loan and any fees not included, since a longer loan can cost more in total.
What is a 0% APR?
It means no interest is charged during a set period, often on new purchases or transferred balances. Once the period ends, the regular APR applies to any remaining balance.
What is the APR full form in banking?
The full form is Annual Percentage Rate. Banks and lenders use it to show the yearly cost of a loan or credit line.
Is APR the same as the interest rate?
Not always. On credit cards they usually match, but on mortgages and many other loans the APR also includes certain fees, so it is often slightly higher.