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  • Credit cards can lead people into financial trouble, especially if they don't understand all the terms when signing up for one. APR is an important term for credit card holders to understand.

    Identification

    APR stands for annual percentage rate. It is the interest rate you are charged if you carry over a balance on your credit card bill.

    Types of Rates

    A credit card can come with a fixed rate APR or a variable rate. A variable rate can change depending on other interest rates and economic factors without prior notice to the credit card holder.

    Feature

    A variable interest rate is also called a floating rate. This is because of its ability to change along with the variations of other rates.

    Consideration

    Before signing up for a credit card, it is important to know how often a variable APR is likely to change. This can be found on the credit card application.

    Expert Insight

    According the the Federal Reserve Board, APR percentages for everything---including purchases, cash advances, penalty rates---will always be displayed on credit card applications. This is a federal law.

    Source:

    The Federal Reserve Board: Choosing a Credit Card

    CreditCards.com: Variable interest rate

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