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How Is Credit Card APR Calculated?

April 26, 2017Apr calculated card cards credit credit card Finance rates

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How Is Credit Card APR Calculated?

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When shopping for a credit card, consumers are always on the lookout for the best Annual Percentage Rate. However, not all APRs are computed in the same way, which can make a big impact on your finance charges.ConsiderationsNo federal law prescribes how a credit card company must compute its APR, reports Creditor Web. However, companies must reveal the method they use to calculate your particular APR, and many use similar formulas.FormulaThe credit card APR formula is unlike a normal formula because the principal and term of the loan are not set, reports Creditor Web. Thus, you must estimate APR by calculating the interest on the interest over a 12-month span, in addition to any fees. Say you receive a credit card with 10 percent interest.