What does APR stand for in relation to credit cards?

The term APR stands for Annual Percentage Rate, which is a key concept in the realm of credit cards and other forms of borrowing. APR represents the annualized cost of borrowing expressed as a percentage, which includes not just the interest rate but also any associated fees that may be charged by the lender. This makes it easier for consumers to understand the true cost of a loan or credit card on an annual basis, allowing for better comparisons between different financial products.

By providing a standardized measure, APR enables borrowers to see the total cost of credit in a simplified way, which is crucial in making informed financial decisions. This understanding aids consumers in evaluating different credit card offers, helping them identify which option is more favorable based on their financial situation and usage pattern.

Knowing that APR encompasses both the interest rate and additional fees is vital; this transparency can prevent misunderstandings about the cost of credit, encouraging responsible borrowing habits.