What is APR?

APR stands for Annual Percentage Rate, but what exactly is that?

It’s about the cost of borrowing

The APR gives you a rough idea about how much your borrowing could cost each year, shown as a percentage. It’s also a handy way to compare credit products quickly.

  • The higher it is, the more expensive it’ll be to borrow. 
  • The lower it is, the cheaper borrowing will be.

For a quick run through, watch our short video.


Watch our video for a simple explanation of what an APR (Annual Percentage Rate) is.
  • Helping you understand APR.

    Meet Guy.
    Guy's thinking about getting a credit card, but he wants to know what his borrowing might cost.

    The first thing he could look at is the credit card's APR, which stands for Annual Percentage Rate.

    This is an estimate of how much Guy's borrowing will cost over the year, as a percentage of the money he borrows.
    The higher the APR, the more expensive it'll be for Guy to borrow.

    APR includes the interest paid on borrowing, as well as other fees, such as application fees or standard card charges.
    But APR doesn't include extra charges, such as fees for cash withdrawals or late payments.

    You might have heard the term ‘Representative APR'.
    This simply means the rate that most people will receive.
    This rate isn't guaranteed for everyone, but it can help you compare different cards from different providers.

    Let's take a look at an example of how APRs can differ.

    Guy now has his new credit card – we'll call it Credit Card A.
    On day 1 of using the card, he purchases a laptop for £1200.
    He pays it back over the next year in equal payments plus any interest charged, with no other credit card spending over this time.

    Guy's card gives him a standard annual purchase interest rate of 18.9%, with no annual card fee.
    However… if Guy had chosen Credit Card B, for example, he would also have an 18.9% standard annual purchase interest rate, but he'd have to pay an annual card fee of £150 as well. And this extra fee would add to the Representative APR of the credit card, making it higher at 31.5%.

    So if he'd gone with Credit Card B, it would've ended up costing Guy more, although it's possible that card comes with other benefits.

    Let's quickly go over a few key points.
    Annual Percentage Rate includes interest paid on borrowing, as well as other fees and standard card charges.
    The higher your credit card's APR, the more it'll cost you to borrow.
    And Representative APR is helpful for simple comparisons.
    Oh, and remember, be sure to research your options so you can pick a card that's right for you.

    We hope this info helps. Thanks for watching!

Here's what APR includes

Interest plus fees equals APR


APR calculations are usually based on your card purchase interest rate.



Annual or application fees are included in the APR calculation.



The estimated cost of borrowing is shown as a percentage – the Annual Percentage Rate.

There is a difference between interest rates and APR

Interest rates account for just one potential cost of having and using a credit card. APR includes other standard fees, meaning it gives you a more complete picture of the costs.

APR doesn’t include all costs

  • Additional fees and charges could apply when using your credit card on a month-to-month basis. Those might include late payment fees, cash advance fees, transfer fees and so on.
  • Interest rates could be higher for other transaction types, such as cash withdrawals and advances. Remember, APR calculations are usually based on the card purchase interest rate only.

What’s a representative APR?

This is the interest rate that at least 51% of applicants are expected to get, although the actual rate and credit limit offered is based on an assessment of your circumstances. The representative APR is usually based on:

  1. A credit limit of £1,200.
  2. Spending the full £1,200 on the first day.
  3. Equal monthly repayments over a year.
  4. No other spending is made.

Why representative APRs are useful

Most lenders provide a representative APR, making it easier for you to compare two or more cards. Things like annual fees could push the APR up, but you might receive additional benefits for those, so make sure you check all of the finer details carefully before choosing a credit card to suit your needs.

Example of APR in practice


Credit limit

Standard purchase interest rate (variable)

Annual card fee

Representative APR


Credit Card A

Credit limit


Standard purchase interest rate (variable)


Annual card fee


Representative APR



Credit Card B

Credit limit


Standard purchase interest rate (variable)


Annual card fee


Representative APR


See if you’re eligible with Simple Check

Simple Check makes it easy to find and compare Halifax credit cards you’re eligible to apply for. Our short form only takes around five minutes to complete.

  • We’ll tell you which Halifax credit cards you’re likely to be accepted for.
  • You’ll see the APR for each option, and the credit limit you’re likely to get.
  • With no impact to your credit score.

Check your eligibility

Frequently asked APR questions

  • Yes. Representative APR gives you an estimate of the cost of borrowing over the course of a year, including any standard fees, such as annual or application fees.

    AER or Annual Effective Rate (sometimes called Annual Equivalent Rate) is a ‘compounded interest rate’, meaning it includes any interest charged on top of interest billed to your account over the course of a year.

  • At least 51% of applicants will be offered the advertised rate, but that’s based on an assessment of your personal circumstances. If you're not eligible for the advertised rate, you could still be eligible for a different one.

    Many credit card issuers provide an eligibility check tool, helping you to narrow down your search to credit cards you are eligible to apply for. The Halifax version is called Simple Check.

  • The APR is useful for making quick comparisons, but you should review all details before making any decisions. The APR is usually based on the card purchase rate only, so if you plan to make transfers or other types of transaction, you’ll need to compare more than just APRs.

    Also consider any fees which might apply as you use your credit card, in addition to any annual or application fees, which are included in the APR calculation. Those could include things like transfer or cash advance fees, and charges for missing payments. Some lenders will also charge for going over your credit limit.

A summary on APR

APR gives you an estimate of how much your borrowing could cost.

  • The lower the APR, the cheaper it could be for you to borrow. 
  • APR is usually based on the card purchase interest rate, plus standard fees.
  • APR doesn’t include other fees and charges, such as cash advance or transfer fees.
  • You can compare credit cards using the APR, but always read through card details carefully.

Halifax is a division of Bank of Scotland plc. Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh EH1 1YZ. Bank of Scotland plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 169628.