# What Does 24.99% APR Mean?

Last Updated on 09/13/2017 by GS Staff

A:

APR stands annual percentage rate. The APR is the total cost of borrowing. If you have a 24.99% APR, this is the amount you will pay annually to have the pleasure of borrowing from your credit card company.

Your credit card company actually breaks down the 24.99% APR into a daily periodic rate so that your monthly interest can be calculate. The daily periodic rate for a 24.99% APR is 0.068466%. You calculate this by taking 24.99 ÷ 365 days.

Without getting technical, your monthly credit card interest rate is calculated as follows:

Daily Periodic Rate x Number of Billing Cycle Days x Average Daily Balance

Note that the hard part of calculating the monthly interest is determining the average daily balance. This is because the average credit card user has multiple transactions per month of purchases and typically one payment. To figure out the average daily balance you have to add up the daily balance for each day of the month and divide this number by the number of days in the billing cycle.

You are probably confused, but the below video does an excellent job of explaining how credit card interest works, if you want to dig into it deeper.

Remember that a large percentage of credit card companies offer a grace period to pay your balance in full to avoid paying interest. The grace period will be at least 21 days if your credit card company offers a grace period. You will not pay interest if you are able to pay off your credit card by the due date listed on your credit card statement.

A 24.99% APR is a very high rate to be charged for anyone. If you have the ability, you should strive to pay off the balance of this credit card each month. You may be able to obtain a credit card with a much lower interest rate if you shop around. However, this will depend on your creditworthiness.