Why did my credit card APR increase?

Learn what might cause APR increases and what you can do to stay on top of your credit card APR.

You’ve probably come across the term annual percentage rate (APR) before. But what is APR? What can increase your credit card APR? And what can you do about it? 

Keep reading to learn more about what might increase your credit card APR and some ways to steer clear of avoidable APR increases. 

What is APR?

It can be easy to lump credit card interest rates and APR together—especially since they may be the same rate—but they mean different things.

According to the Consumer Financial Protection Bureau (CFPB), “A credit card’s interest rate is the price you pay for borrowing money.” 

In other words, your interest rate is the percentage charged on the principal loan amount. For a credit card, that principal loan amount generally is the amount you spend on your card.

Compared to the interest rate, the APR is a “broader measure of the cost of borrowing money,” says the CFPB. 

That’s because the APR includes the interest rate plus other costs, like lender fees, closing costs and insurance. So if there aren’t any other fees, your interest rate and APR may be the same. And that’s typically the case for credit cards.

Keep in mind that if you pay off your balance on time every month, you might not be charged any interest. Your card might also have a grace period. But if you do carry a balance, you might be charged interest—based on the APR—for the unpaid portion.

What factors can affect my APR?

Credit cards typically have multiple APRs associated with them. And there are many factors that might affect your APRs. Here are a few to know about:

The prime rate

There are two basic types of APR: variable and fixed-rate

Like the name suggests, a variable APR will likely change throughout the course of the loan because it’s tied to an index interest rate like the prime rate. When the prime rate changes, so does the credit card APR. 

A fixed-rate APR, on the other hand, generally doesn’t change over the life of the account. And if a fixed-rate APR does change, the credit card issuer typically has to notify the cardholder, says the CFPB. 

Introductory periods

A new credit card may come with a lower, limited-time APR. This introductory rate might apply to purchases, specific transactions like a balance transfer or both. 

The CFPB says an introductory APR period must last at least six months unless you’re more than 60 days late on your payment. 

Then, if you’re carrying a balance on the credit card when the introductory period ends, your card’s standard APRs will be applied to that balance.

Cash advances

A cash advance lets you borrow a certain amount of money against your credit card’s line of credit. Basically, that means a cash advance lets you withdraw cash, among other transactions, using your credit card. Keep in mind that transactions involving cash equivalents—like wire transfers, for example—might also be considered cash advances. 

It’s important to know that cash advances usually have a higher APR than regular credit card purchases. They can include other fees, too. Plus, cash advances might not have a grace period

Violating the terms of your credit card agreement

If you violate the terms of your card agreement, the APR on your card may increase for a period of time. This is known as a penalty APR. 

Depending on your card, things like missing payments, making late credit card payments, going over your credit limit or failing to make the minimum payment might trigger an APR increase. You could lose the introductory rate, too.

It’s always a good idea to make sure you understand all the terms of your credit card agreement. That way, you’ll know when the penalty APR might kick in. 

Things to consider about credit card APR

If you’re considering applying for a credit card, the CFPB recommends doing your research and comparing cards before you apply. That includes looking into things like APR, penalty APR, balance transfer APR, fees and more. 

Pre-approval or pre-qualification can also help you compare options and find the right fit. And with pre-approval from Capital One, you can find out whether you’re pre-approved for some of Capital One’s credit cards before you even apply. It’s quick and only requires some basic info—and it won’t hurt your credit score.

It’s also important to know how to use credit responsibly once you have it. For example, the CFPB recommends paying off your balance in full each month whenever possible. With most cards, paying your full balance on time can help you avoid interest charges, and it can be a part of helping you maintain a good credit score. 

But responsible use doesn’t end there. It also includes things like consistently paying on time, maintaining a healthy credit utilization ratio and monitoring your credit

Monitor your credit

No matter where you are in your credit journey, it’s a good idea to keep track of where your credit stands. One way to monitor your credit is with CreditWise from Capital One

CreditWise gives you free access to your TransUnion® credit report and weekly VantageScore® 3.0 credit score—without hurting your score. CreditWise is free and available to everyone—even if you don’t have a Capital One account. 

You can also get free copies of your credit reports from the three major credit bureaus. Call 877-322-8228 or visit AnnualCreditReport.com to learn more.

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