Money and I have never been firm comrades.
It’s bizarre, really, because I was a dedicated, head-braced student (with awkward posture and a slight lisp) that bagged an A in my maths GCSEs. Pass me an algebraic equation and I’m on it faster than a rat out of an aqueduct. But when it comes to my own personal finances, I’m a shambles. (My Dad would qualify this too, after years of trying to get my head out of the financial sand with various threats – “I won’t drive you to Northampton’s Ritzy again this month if you keep going like this.”)
Looking back, I think the school curriculum should cover these basics: how to make a good spag bol, tax returns, learning to say ‘sorry’ (if you are, indeed, wrong) and understanding personal finance and credit.
The thing is, back then in my spotty youth days, I had no one depending on me and only my parents to raise their frustrated eyebrows. Now, however, I have to face my doe-eyed toddler on a daily basis and my actions have actual impact on tangible things like bricks and mortar. Oh, yes, mortgages – that’s another one I’d like to add to the school’s list of ‘life stuff we should know’.
But when it comes to understanding the ins and outs of credit and what you need in your arsenal, I felt quite alone in this financial abyss.
That’s why I’ve teamed up with Capital One, a company that aims to dispel the myths and clear up the jargon around credit. I’ve covered basic credit tips here and eligibility checkers here so it’s time to now take on the beast that is APR.
Like, what even is APR? (That’s Annual Percentage Rate for those who rely on Google – my fallback in most major life decisions). Credit providers advertise their products using their APR. The APR makes it easy to compare different credit products before deciding which one is best for you. For credit cards the APR is based on the purchase interest rate (this is the rate applied to all purchases you make on your card) and includes things like annual fees, although cash withdrawal charges and default fees are not included.
It won’t tell you exactly how much you’ll end up paying back but it will help you compare credit card deals to find out which one is best for you, and which ones you can afford.
When it comes to APR, the APR you see when you apply might not be the one you get, which even to a financial novice – is hard to wrap your head around. Credit lenders are required to give at least 51% of people the advertised APR which means the remaining 49% may be offered a different APR to the one they saw advertised. Getting a higher APR than you expected could result in you paying more money back if you don’t clear your balance every month. So basically it’s like signing up the the gym (a very loose comparison seeing as I haven’t broken into a sweat in a year) but if you fall into the 49%, you may be expected to pay more for your membership; you’d have to pay more than you thought to do those butt-firming squats, and no one wants that.
Come into the light, don’t lurk in the financial darkness like I have for years. Capital One encourages people to be mindful of what the advertised APR is, but also to look further into the terms and conditions (along with all product details available on the lender’s website). This is to check whether you could be offered a different APR to the one you think you might get so you can work out whether that’s the right thing for you. It’s basically about being fully informed and knowing exactly where you stand.
Let’s talk about APR
Lenders have to state the APR and make it really obvious so that you’re able to compare prices for credit. A higher APR means it will cost you more to borrow if you don’t clear your balance monthly.
Does it say you could be offered a different APR once you’ve applied? To find this out, you’ll need to read all the information provided, for example look at the summary box, the credit card agreement and the product information on the website.
Apply for a credit card through an eligibility checker to see if you’ll be accepted without affecting your credit rating. Our eligibility checker QuickCheck will also tell you the APR you’ll get once you’ve applied, no surprises, just 100% clarity.
The Capital One Classic credit card features a 34.9% APR variable representative rate.
This post was created in partnership with Capital One who I am working with to help cut through the confusing world of credit.