What does APR mean and how does it work?

The term “annual percentage rate” (APR) refers to the cost of borrowing money (also known as the interest rate on your credit cards), and it is the primary means through which the majority of creditors generate the majority of their revenue.

Credit card firms utilize the APR, which is stated as an annual rate, to compute the interest that is charged on a daily basis, and then they bill you on a monthly basis for this amount. To put it another way, you may convert your annual percentage rate (APR) to a daily percentage by dividing it by 365 in order to determine how much interest you will be charged for each day that you carry debt.

Your credit card firm will do a calculation at the end of each day that involves multiplying the existing amount on your account by the daily rate. After that, the next day, that daily interest charge will be charged to your existing amount.

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