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APR

Last reviewed 2026-03-10 · Educational content only — no partner offers on this page.

Explain it like I’m new

The yearly cost of borrowing money, expressed as a percentage. Higher APR = more expensive debt.

Technical version

Annual Percentage Rate; the cost of credit expressed as a yearly rate per the Truth in Lending Act, including certain fees but not compounding (unlike APY).

Why people get confused

✕‘APR and APY are the same.’ APY includes compounding; APR usually doesn’t.
✕‘The lowest APR is always best.’ Fees, terms, and prepayment penalties matter too.

What decision this affects

Why it matters

APR is the clearest single number for comparing loans and credit cards.

→Compare APR across offers before signing anything.
→Pay credit cards in full to make APR irrelevant.

Related next concepts

Credit

Credit utilization

How much of your available credit you’re using. Lower is better for your score — generally under 30%, ideally under 10%.

Continue →

Part of a learning path

Start Here: Money Basics →Understanding Credit →

Trusted sources

Educational — no commercial relationship.

What is a credit utilization ratio?

CFPB · Government · 2025

Trust score 94

Questions people ask

Is 0% APR really free?
How is credit-card APR calculated?

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