Understanding Variable Annual Percentage Rate

When comparing credit cards or applying for one, you have probably noticed the words “variable APR” usually located under or after the advertised APR, or at the very least as part of the fine print. This words are often ignored by many credit card applicants, especially after seeing such low APR on the ads. This is a huge mistake since there is a very important reason why it is part of the disclaimer.

Variable APR simply means that the annual percentage rate quoted on the ad is indeed variable, or can change. This means that the total cost of borrowing on your card each year, as indicated by the APR, can actually change once you already have the card in your hands. Hence, getting a low apr credit card does not always guarantee that the APR on your credit card will always remain that low. For this reason, you should always keep track of your APR, especially after you’ve had a credit card for a long time. You might not realise it, but your rates might have gone up, and your once low APR card is now just an average, or maybe even high interest, credit card. If you find that your APR has gotten unreasonable, especially compared with new credit card offers in the market, maybe it is time to apply for a new low APR credit card again.

Cardholders who did not do their job of really understanding what was being offered to them back when they first applied for their credit card are then left clueless as to why something seems wrong with their credit card bills. They can’t figure out why their rates “seem” to being going up, when they are in fact, indeed going up. Once they do realise what is happening, they then end up blaming the credit card company for “fooling” them into getting a low APR credit card whose rates are variable, when the truth is that the credit card rates has been advertised as variable from the very start.

As the person responsible for your own finances, make sure that you do not disregard any part of the advertisement, especially the disclaimers. If you do not understand any of the jargon, such as with variable of typical APRs, do your own research or ask your bank for clarification before filling up any credit card applications. In the end, it will allow you to use your credit card more wisely and lessen your frustration with “surprise” rate changes and charges.

By: Alex Foreman

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Peter Carville is a freelance article writer who writes for Financial Facts about the current financial news and the credit crunch.