Hi everyone, welcome to the first ever video in “The Simple Way” series.
What does APR really mean?
you might have seen it here and there but what is it really?
What does representative ,typical and personal APR mean?
APR stands for Annual percentage rate of charge,
Representative and typical APR are one and the same and that is the rate that most people get who have applied and get accepted for that loan or credit card, the other group of people may be charged a higher APR depending on their individual circumstances and that would be their personal APR.
APR is shown as a percentage that represents the actual yearly cost a loan will cost you.
For any type of loans the APR would include the interest rate and some type of arrangement fees however representative APR only includes compulsory charges.
they wont include charges and fees that are not compulsory and that would be something like a missed or late payment, cash advance fee for credit cards, charges for early loan repayment or balance transfers etc.
Different credit cards and loans have different fees included and excluded in the APR. Tread carefully.
If you are interested in seeing a complete breakdown of all the charges and fees, Click the link below.
American express fees and charges link: https://www.americanexpress.com/uk/credit-know-how/credit-card-fees/
How does it work?
Lets say you spent £1000 from your American express credit card which has an apr of 22.9% and assuming you will not pay off any of that debt, you would accumulate an additional £229 of debt after a year. APR is usually calculated and added every month and the monthly value would be 22.9%/12months which would roughly be 1.9% a month.
if you spent £1000 on your card and paid back £100 before the end of the month the interest you would pay would be 1.9% of £900 which would be around £17.
which doesnt seem much but it adds up, especially when they increase your spending limit.