What is APR

What does annual percentage rate mean?

APR is a term that’s used when discussing credit products like credit cards, automobile loans, or mortgages, but what does annual percentage rate mean, exactly?

APR stands for annual percentage rate and determines the cost of credit for a year. The process is standardized across the financial industry and the information will allow you to compare individual products (like a credit card or mortgage) from various lenders before you make your decision.

How does APR work?

APR can be applied to a variety of different loans and credit cards. For example, if you have a credit card and you do not pay the outstanding balance for your purchases in full by the due date, the specified annual percentage rate (APR) will be applied to the balance going forward.

How is APR calculated?

The APR may be fixed or variable for credit cards or auto, personal and home loans. Most credit card issuers base their variable rate on the U.S. Prime Rate, with an additional margin applied. While the margin will most likely remain the same during the course of the borrowing, the APR may change if the Prime Rate fluctuates, because your margin and the Prime Rate determine your rate overall.

How to calculate how much interest you owe

Financial institutions use a very precise formula to calculate how much interest you will pay. In the case of a credit card, this is often governed by the daily periodic rate, which equals the APR divided by the number of days in the year. This ratio will then be applied to the outstanding balance for the number of days in the billing period to determine how much you owe. Some financial institutions use different methods to calculate interest.

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Types of APRs for credit cards

Different types of APRs may apply depending on how you use your credit card. How you use your card and how quickly you pay off your balance can both affect the amount of interest on your card, so it’s important to keep up with your payments. The APR options will vary based on both the card and the financial institution. For example, at Huntington, you can choose to earn rewards or a lower APR on a Voice Credit Card®.

The types of APR include

    APR vs interest rate

    Some people think that the terms “APR” and “interest rate” are one and the same thing. However, the APR for closed-end credit (like a mortgage loan) may include other items such as certain closing costs. Once you understand what APR means, you can make better-informed decisions to help you manage your finances.

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    § The Voice Credit Card® lets you choose between the option to earn cash back rewards or get a 2% lower purchase APR instead of rewards. The lower rate card does not earn rewards. On the rewards card, you can earn 3% cash back on the first $2,000 that you spend each quarter in one of 10 pre-selected categories. Earn 1% cash back even after you reach the quarterly limit. Plus, earn an unlimited 1% cash back on all other purchases. You may change the category within the first 30 days of opening a new account and again prior to the start of each quarter for the next quarter. For example, if you spend $3,000 in your pre-selected category of travel and $1,000 on other purchases in the quarter, you will earn the maximum 6,000 3X points in your pre-selected category and an additional 2,000 single points. You can redeem the 8,000 points for $80 in cash back or other rewards. Visit huntington.com and click Credit Card for full rewards terms and conditions.

    Voice Credit Card Terms and Conditions, Voice Rewards Terms and Conditions.

    Mastercard and Mastercard Brand Mark are registered trademarks of Mastercard International Incorporated.

    Voice Credit Card® is a federally registered service mark of Huntington Bancshares Incorporated.

    Disclosure

    The information provided in this document is intended solely for general informational purposes and is provided with the understanding that neither Huntington, its affiliates nor any other party is engaging in rendering financial, legal, technical or other professional advice or services, or endorsing any third-party product or service. Any use of this information should be done only in consultation with a qualified and licensed professional who can take into account all relevant factors and desired outcomes in the context of the facts surrounding your particular circumstances. The information in this document was developed with reasonable care and attention. However, it is possible that some of the information is incomplete, incorrect, or inapplicable to particular circumstances or conditions. NEITHER HUNTINGTON NOR ITS AFFILIATES SHALL HAVE LIABILITY FOR ANY DAMAGES, LOSSES, COSTS OR EXPENSES (DIRECT, CONSEQUENTIAL, SPECIAL, INDIRECT OR OTHERWISE) RESULTING FROM USING, RELYING ON OR ACTING UPON INFORMATION IN THIS DOCUMENT EVEN IF HUNTINGTON AND/OR ITS AFFILIATES HAVE BEEN ADVISED OF OR FORESEEN THE POSSIBILITY OF SUCH DAMAGES, LOSSES, COSTS OR EXPENSES.

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