What is APR?

Credit cards can be a great help when it comes to financing your ambitions, but you'll want to get the card that's right for you. Looking at the APR will help when you're shopping around.

What does APR stand for?

APR stands for Annual Percentage Rate. It's the way lenders describe the cost of borrowing money over a year. This is done in a standard way to allow you to compare the cost of products from different lenders. It takes into account interest as well as other charges you'd have to pay, such as any annual fee. For credit cards, it's based on an assumed credit limit of £1,200.

How is it representative?

Not everyone applying for a loan or credit card has the same likelihood of paying it back on time. Some people are a better risk than others. If lenders determine you have a stronger likelihood of paying what you owe, they may offer you a lower rate.

Lenders can't just show their lowest rate if most customers applying for the product won't be offered that rate. They need to expect at least 51% of the customers who successfully apply to be offered the advertised rate, or lower. The others (up to 49%) will most likely get a higher rate.

What does it include?

The representative APR includes the rate of interest (for credit cards, there can be different rates so the APR uses the rate which applies to the way the card is most commonly used - usually the standard purchase rate). It also takes into account other charges you'd automatically have to pay such as any annual fee, or loan arrangement fee.

What does a representative example look like?

Below is a representative example for the HSBC Balance Transfer Credit Card.

  • The purchase rate is the interest rate the bank will apply to any purchases you make with the card
  • The interest rate is 21.9%
  • Because there is no additional fee, the representative APR is also 21.9%


Representative Example

Representative APR (variable) 

21.9% APR

Purchase rate (variable) 

21.9% p.a.

Based on assumed credit limit of 


Compare this with the representative example for the HSBC Premier World Elite™ MasterCard, which has an annual fee.


Representative APR (variable)

59.3% APR

Purchase rate (variable) 

18.9% p.a.

Based on assumed credit limit of 


Annual fee 



While the purchase rate is the same as HSBC Balance Transfer Credit Card at 21.9%, the £195 fee is included in the representative APR - so the representative APR rises to 59.3% because of the impact of the fee.

However, the example doesn't take account of the benefits you can earn from using this card, such as the Enhanced Rewards Programme.

What's not included?

For credit cards, the representative APR assumes you only use the card for purchases and doesn't take into account different rates and fees which might apply if you use the card in different ways, such as for balance transfers or cash withdrawals.

It also doesn't include any fees or charges for things like late payments, going over your credit limit or returned payments. Only compulsory charges are included in the representative APR - so voluntary charges like payment protection insurance aren't included either.

What else do you need to know?

The representative APR is just to help you compare cards and might not actually match up to what a card costs you. That will depend on how you use the card and how much you can repay each month.

It assumes that you spend the full £1,200 on the first day and then pay it back in equal, regular instalments over a year without spending anything else.

Did you know...? Having a good credit rating means you're more likely to get the representative APR.