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What is an interest rate?

When you borrow money whether it's on a credit card or a loan you will probably need to pay interest on that amount. A credit provider will determine your interest rate based on your credit score and that interest rate will be applied to the amount you've borrowed. Interest is calculated as a percentage on the amount you borrow so the longer it takes for you to pay off the amount, the more interest you will end up paying.

The interest rate for credit cards can differ depending on how you use your card, so you may have different rates of interest for purchases, balance transfers and cash withdrawals.

Most credit card providers will wait up to 56 days before charging you interest on purchases, paying off your balance in full each month could help you avoid paying any interest.

What is a purchase rate?

This is the rate applied to all purchases you make on your card such as, petrol, new shoes and holidays.

What is a balance transfer rate?

The balance transfer rate is applicable to any debts you may have transferred to your credit card from other credit or store cards.

What is a cash withdrawal rate?

Unsurprisingly, this rate applies to any cash you have withdrawn using your credit card. The interest on cash is calculated daily so it's a good idea to only withdraw cash in emergencies. You may also be charged a fee for taking cash out on your credit card; this will be added to the amount withdrawn and be subject to the same rate of interest.

What is a credit card APR?

Credit providers will advertise their products using their APR (Annual Percentage Rate of charge).

The APR makes it easy to compare different credit products before deciding which one is best for you. For credit cards the APR is based on the purchase interest rate and includes things like annual fees, although cash withdrawal charges and default fees are not included.

It won't tell you exactly how much you'll end up paying back but it will help you compare credit card deals to find out which one is best for you, and which ones you can afford.


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Credit Made Clearer provides general information about credit and does not provide financial advice. If you require financial advice about a specific issue you should consult an independent financial adviser.