9 Factors That Determine Your APR Rate

If you have credit card debt, you’ve probably come across the question, “What is a good APR rate?” A good annual percentage rate (APR) usually sits between 10 and 30 percent. It is one of the key factors in determining how much interest you pay on your debt. It also helps determine whether you’ll be able to pay off your balance before the end of the year or if you’ll be stuck paying minimum payments for years to come. Read on to learn more about calculating your APR and which factors affect it.

1. Credit Card Issuer

As per the professionals at SoFi, “APR will vary based on the type of credit card.” The credit card issuer is the financial institution that issues the credit card to the consumer. The credit card issuer is also the organization that sets the APR rate for the credit card. Therefore, the type of credit card issuer you have will affect your APR rate.

2. Creditworthiness

One of the biggest factors determining your APR is your creditworthiness—in other words, how likely you are to repay your debt. This is determined by your credit score, which is a number that represents your credit history.

3. Type of Account

The type of account you have can affect your APR rate. For example, you may have a higher APR if you have a business credit card than if you have a personal credit card.

4. Other Fees

In addition to the APR, you may also be charged other fees. The type of card and how much you spend on it will determine how many fees are assessed.

5. Annual Percentage Rate Changes Over Time

APR changes over time and is affected by many factors. Some of these factors include:

  • Credit history
  • Credit score
  • Length of credit history
  • Debt/income ratio
  • Credit card type

These APR changes can significantly impact your budget and the amount you owe if you have outstanding balances on your credit cards.

6. Tax Consequences

Depending on the structure of your business, you may be subject to different tax consequences. For example, if you are a sole proprietor, you will be taxed as an individual.

7. How Late Payments Affect Interest Rates

Your payment history is an essential factor in figuring out your interest rate. According to the experts at SoFi, your rate will be higher if you have a past of delinquency.

8. Using Your Card a Lot vs. Not at All

One factor determining your APR rate is how often you use your credit card. For example, if you are someone who pays their balance in full every month, you will likely have a lower APR than someone who only makes the minimum payment.

9. Transferring Balances

One factor affecting your APR is whether or not you transfer balances from other credit cards. If you do, the issuer may charge a balance transfer fee, typically a percentage of the amount being transferred.

After reading this blog post, you should better understand how your APR rate is determined. Keep in mind that your credit score is one-factor lenders look at when considering you for a loan or credit card.

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