Understanding APR
01.Annual Percentage Rate (APR)
APR represents the annual cost of borrowing money on your credit card. US credit card APRs are very high—often between 20% and 30%. If you carry a balance from month to month, interest is calculated daily and adds up quickly.
02.The Grace Period
If you pay your statement balance in full every month, banks offer a 'grace period' where they do not charge any interest on new purchases. This means credit cards are essentially free short-term loans if paid off monthly.
03.Cash Advance Warning
Using a credit card to withdraw cash from an ATM is called a cash advance. Cash advances do not have a grace period—interest starts accumulating immediately, and banks charge high upfront fees. Avoid cash advances!