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What does APR mean?

APR, or annual percentage rate, is the cost of borrowing money on a credit card or loan over a year.

It takes into account the interest, and any other charges you'll need to pay, such as an annual fee.

What is representative APR?

Representative APR can help you compare the cost of different products without having to apply.

To be able to advertise a representative APR rate, a lender needs to offer the rate to at least 51% of the customers who successfully apply.

What's included in representative APR?

As there can be different rates of interest for credit cards, the APR uses the rate that applies most commonly to the way the card is used. This is usually the standard purchase rate. It also takes into account any other charges you'd have to pay, like an annual fee or a loan arrangement fee.

Representative APR for credit cards is based on a credit limit of £1,200. It assumes you spend this all on the first day and pay it back over the year, in regular, equal instalments (without spending anything else).

What does an example of representative APR look like?

  Example 1 Example 2
Purchase rate (variable) 21.90% 18.90%
Annual fee £0 £195
Credit limit £1,200 £1,200
Representative APR (variable) 21.90% 59.30%

What does an example of representative APR look like?

  Purchase rate (variable) Purchase rate (variable)
Example 1 21.90% 21.90%
Example 2 18.90% 18.90%
  Annual fee Annual fee
Example 1 £0 £0
Example 2 £195 £195
  Credit limit Credit limit
Example 1 £1,200 £1,200
Example 2 £1,200 £1,200
  Representative APR (variable) Representative APR (variable)
Example 1 21.90% 21.90%
Example 2 59.30% 59.30%

While it has a lower purchase rate than example 1, example 2 includes a £195 annual fee – causing the representative APR to rise to 59.3%.

It's important to be aware that representative APR doesn't take into account any potential benefits you could earn from using different credit cards.

What's not included in representative APR?

The representative APR assumes you only use the credit card for purchases. It doesn't take into account the different rates or fees that might apply for:

  • using the credit card for things such as cash withdrawals or balance transfers
  • late payment charges
  • going over your credit limit
  • returned payments
  • payment protection insurance

Only compulsory charges are included in the representative APR.

What else should you be aware of?

Representative APR helps you compare credit cards and loans quickly, and will not match up to what a loan or credit card actually costs you. That will depend on the final rate you're offered, how you use the credit card or loan, and how much you repay each month.

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