Credit card APR vs. interest rate: What's the difference?
Ryan Wilcox is a writer on TPG's credit cards team. He's a recent graduate of UNC-Chapel Hill and enjoys writing, filmmaking and racking up points and miles for destinations TBD.
Feb. 11, 2023
•
2 min read
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The world of credit cards can be confusing, whether you're new to it or not.
One question we get pretty frequently is: What is the difference between the interest rate and the annual percentage rate (APR)? Is APR the same as interest rate?
What's the difference between interest rate and APR?
With some financial products, the interest rate and the APR are different. With credit cards, though, they're basically the same.
The U.S. Government's Truth in Lending Act requires all consumer lenders to state their interest rates as APRs. APR is considered the "real" annual cost of borrowing money, including fees and other charges in addition to the interest rate. If you take out a mortgage, for example, you'll pay an origination fee and other charges upfront; these then get factored into the APR on your mortgage. Credit cards don't do that, meaning the APR on your card is precisely equal to your interest rate.
When you take out a mortgage, for example, you often have to pay an origination fee, points and other charges upfront. The APR takes those into account, so a mortgage with an interest rate of, say, 5.5% might actually cost you something like 5.8% a year.
Is APR the same as the interest rate?
For credit cards, yes, the APR is essentially the same as the interest rate. However, for other interest-accruing products like mortgages and car loans, the APR may be higher than the interest rate. That is because there are often fees and charges incorporated into the APR on these products.
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Bottom line
With credit cards, the APR is just interest. Any annual fee that you pay or charges like balance transfers, cash advances and late payments don't get included in the APR. That's because companies can't predict which cardholders will incur which fees.
Of course, credit card APR can also be avoided completely by paying your balance on time and in full, one of TPG's ten commandments of credit card rewards.
If you're working on debt, check out TPG's list of the best zero-interest cards on the market to help reduce your borrowing costs.
Featured image by MOMO PRODUCTIONS/GETTY IMAGES
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.
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Our points-obsessed staff uses a plethora of credit cards on a daily basis. If anyone on our team wouldn’t recommend it to a friend or a family member, we wouldn’t recommend it on The Points Guy either. Our opinions are our own, and have not been reviewed, approved, or endorsed by our advertising partners.
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Apply for Delta SkyMiles® Platinum American Express Card
at American Express's secure site
Terms & restrictions apply. See rates & fees
TPG Editor‘s Rating
Go to reviewCard Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
Rewards Rate
| 3X | Earn 3X Miles on Delta purchases and purchases made directly with hotels. |
| 2X | Earn 2X Miles at restaurants worldwide, including takeout and delivery in the U.S. and at U.S. supermarkets. |
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Earn 90,000 bonus miles after you spend $4,000 in purchases on your new Card in your first 6 months.Earn 90,000 Bonus Miles50,000 Bonus MilesAnnual Fee
$250Recommended Credit
Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.670-850Excellent/Good
Why We Chose It
Build your loyalty to Delta by applying for the carrier's mid-tier card option, the Delta SkyMiles Platinum card. The annual fee is quickly recouped by the card's travel perks, such as an application credit to Global Entry or TSA Precheck, annual companion certificate and so much more. Plus you can fast-track to elite status simply through card spend.Pros
- Earn bonus Medallion® Qualification Miles (MQMs) and an Medallion Qualifying Dollar (MQD) waiver when you hit specific spending thresholds with your card within a calendar year
- Receive a Domestic Main Cabin round-trip companion certificate each year
- Statement credit for TSA PreCheck/Global Entry fee (up to $100)
- First checked bag free
Cons
- Doesn't make sense if you don't fly Delta
- SkyMiles aren't the most valuable airline currency
- Earn 90,000 bonus miles after you spend $4,000 in purchases on your new Card in your first 6 months.
- Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. Payment of the government imposed taxes and fees of no more than $80 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
- Enjoy your first checked bag free on Delta flights. Plus enjoy Main Cabin 1 Priority Boarding and settle into your seat sooner.
- New: Card Members get 15% off when using miles to book Award Travel on Delta flights through delta.com and the Fly Delta app. Discount not applicable to partner-operated flights or to taxes and fees.
- Earn 3X Miles on Delta purchases and purchases made directly with hotels.
- Earn 2X Miles at restaurants worldwide including takeout and delivery in the U.S., and at U.S. supermarkets.
- Earn 1X Mile on all other eligible purchases.
- Enjoy a per-visit rate of $50 per person for Card Members and up to two guests to enter the Delta Sky Club when traveling on a Delta flight.
- Fee Credit for Global Entry or TSA PreCheck® after you apply through any Authorized Enrollment Provider. If approved for Global Entry, at no additional charge, you will receive access to TSA PreCheck.
- Earn up to 20,000 Medallion® Qualification Miles (MQMs) with Status Boost® per year. After you spend $25,000 in purchases on your Card in a calendar year, you can earn 10,000 MQMs up to two times per year, getting you closer to Medallion® Status. MQMs are used to determine Medallion® Status and are different than miles you earn toward flights.
- No Foreign Transaction Fees.
- $250 Annual Fee.
- Terms Apply.
- See Rates & Fees