The annual percentage rate can seem like calculus to most people. Its some arcane and hard to understand method to help credit card companies know how much money to charge you every month for interest. The problem isthat makes the annual percentage rate, or APR, very important if you use your credit card. So its just as important for you to have some understanding, even if just basic, of how the annual percentage rate is calculated.
First, you should get the definition of the annual percentage rate. Its actually pretty simple if you look at the APR from this way. By definition, the annual percentage rate is the yearly rate of interest that the credit card charges you, including any fees and costs paid to acquire that loan. The credit card companies figure out this loan in a pretty straightforward way, believe it or not. They take the average compound interest rate of the term of your loan. That way, you can compare one credit card debt, or loan, to another.
The annual percentage rate for a credit card company, in this respect, is just the same as the annual percentage rate that youd be paying for a mortgage, for instance. But with a mortgage, the details are...
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