APR vs Representative APR: What Credit Card Rates Really Mean
Every credit card advert in the UK shows a "representative APR". It's meant to help you compare cards, but it's easy to misunderstand. Here's what it actually tells you, what it doesn't, and which numbers to look at instead.
Key takeaways
- APR (annual percentage rate) shows the yearly cost of borrowing, including interest and compulsory fees.
- The purchase rate is the interest charged on spending. It can differ from the APR if the card has a fee.
- Representative APR is the rate at least 51% of people accepted through that advert are expected to get, under FCA rules. You could be offered more.
- Your personal APR is what matters. Check it before you accept the card.
- If you always repay in full, the APR matters less than fees and perks.
This is general information, not financial advice.
What is APR?
APR stands for annual percentage rate. It's a standard way to show the total cost of borrowing over a year, combining:
- the interest rate, and
- any compulsory fees, such as an annual card fee.
Because every lender must calculate it in the same regulated way, it helps you compare products more fairly than the interest rate alone.
How APR is calculated for credit cards
For credit cards, the FCA's market study explains that the APR assumes the full credit limit is used on day one and repaid in 12 equal monthly instalments, with no further spending. If the limit isn't known at the advertising stage, it's assumed to be £1,200. It's a standard benchmark, not a prediction of what you'll pay.
Purchase rate vs APR
The purchase rate is the annual interest rate charged on what you spend. On a card with no fee, the purchase rate and APR are usually the same or very close.
On a card with an annual or monthly fee, the APR will be higher than the purchase rate, because the fee is included. This is why some rewards cards with large fees show an APR far higher than their interest rate. The interest isn't higher. The APR is including the cost of the fee.
What does representative APR mean?
The FCA defines a representative APR as a rate at or below which the firm reasonably expects at least 51% of the credit agreements resulting from that advert to be made.
In plain English:
- At least half of the people accepted for the card through that promotion should get the advertised rate or lower.
- Up to 49% could be offered a higher rate.
- People who are declined aren't counted.
So the representative APR is a useful benchmark, not a promise.
The representative example
Alongside the representative APR, adverts that mention costs must show a representative example. For credit cards, this typically includes:
- the assumed credit limit
- the purchase interest rate, and whether it's fixed or variable
- any fees included in the cost
- the representative APR.
These must be shown clearly, with equal prominence, and labelled "representative example".
Your personal APR
When you apply, or use some eligibility checkers, you'll see the rate you'd actually get, often called your personal APR or personalised offer. It's based on your credit history and the lender's own assessment.
Before you accept a card:
- Check the APR in your offer, not just the advert.
- Check any promotional periods. You might get a shorter 0% deal than the maximum advertised.
- Compare it with alternatives. If the personal rate is much higher than you expected, you don't have to go ahead.
Which rate matters for you?
If you repay in full every month
You'll usually pay no interest on purchases, so the APR matters less. Focus on fees and perks. See Cashback credit cards and Rewards & travel credit cards.
If you sometimes carry a balance
The purchase rate and APR matter a lot. A lower standard rate can save more over time than any reward. Compare on Low APR credit cards.
If you're using a 0% deal
Look at the length of the 0% period and the rate it reverts to once it ends. See How Do Balance Transfers Work? A Plain-English UK Guide and 0% Purchase Credit Cards Explained: How They Work and What to Watch.
A simple illustration
Imagine two cards, both with the same purchase interest rate. Card A has no fee. Card B charges an annual fee for extra perks.
- Card A: the APR is roughly the same as the purchase rate, because there's nothing else to include.
- Card B: the APR is noticeably higher, because the annual fee is added into the standard APR calculation (based on a £1,200 limit repaid over 12 months).
If you carry a balance, Card A is likely to cost less. If you repay in full every month, you won't pay interest on either. The real question for Card B is whether its perks are worth more to you than its fee. That's why it pays to look at the APR, the purchase rate and the fee together, rather than any one number on its own.
Other rates on your card
A credit card can charge different rates for different things:
- Purchase rate. Charged on spending.
- Balance transfer rate. Charged on transferred debt, often 0% for a promotional period.
- Cash rate. Charged on cash withdrawals, usually higher and charged from day one.
- Money transfer rate. Charged on money moved to a bank account.
All of these are listed in the card's summary box.
Variable vs fixed rates
Most credit card rates are variable, which means the provider can change them. They must tell you in advance and explain your rights. Some promotional rates are fixed for the length of the offer.
Frequently asked questions
Will I get the representative APR?
Not necessarily. At least 51% of accepted applicants must be expected to get it or lower, so you might be offered a higher rate depending on your circumstances.
Why is a card's APR higher than its interest rate?
Usually because the card charges a fee, such as an annual fee, which is included in the APR calculation.
Is a lower APR always better?
If you carry a balance, a lower APR usually means paying less. If you always repay in full, fees and rewards may matter more than the APR.
Does APR matter on a 0% card?
Yes, for what happens after the 0% period ends, and for any spending not covered by the promotional rate.
What's the difference between APR and AER?
APR is used for borrowing and shows the cost of credit. AER (annual equivalent rate) is used for savings and shows the interest you earn.
Where can I find a card's full rates?
In the summary box, part of the pre-contract information every UK card provider must give you before you sign up.
This is general information, not financial advice. Rates and terms are set by each provider and can change.
