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Annual Percentage Rate (APR)
Term category: Finance/Accounting
In 10 words or less: The rate that borrowers (e.g. credit card companies) charge you to borrow money.

Definition: The APR is the stated rate that a lender charges you to borrow money.  For example, 1% monthly interest is 12% annual interest.

Advice: Credit card companies are required by law to disclose the APR they are charging cardholders.  However, since the APR doesn't take into consideration compounding, it's not really all that great of a measure of the interest you'll pay (unless you pay your credit card off monthly).  For this reason, we think the effective annual rate (EAR) is a more accurate portrayal of the card's interest rate.

 

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