Glossary · Bonds and rates
APR (annual percentage rate)
APR is the yearly cost of a loan, interest plus most fees, shown as one percentage so that offers can be compared. US lenders must disclose it.
Also called: annual percentage rate, credit card APR, loan APR, APR vs APY
All accounts at US commercial banks, Aug 2026. Compounded monthly, it works out to 23.4% a year.
Average at US commercial banks, Aug 2026.
In plain words
Two shops offer to lend you $1,000 for a year. One charges 10% interest. The other charges 8% plus a $30 fee. Which is cheaper? The annual percentage rate, or APR, answers by folding the fees into one yearly rate, so loans can be compared side by side.
In the US, the Truth in Lending Act of 1968 requires lenders to show the APR on credit cards, car loans, mortgages and personal loans. For a credit card, the APR is simply its interest rate; for a mortgage it is a bit higher than the rate, because closing fees and points are counted.
Credit cards are among the most expensive ways to borrow. The average rate on US bank cards was 21.19% in Aug 2026: carrying a $1,000 balance for a year costs about $212 in interest.
Example
Comparing two loans
You borrow $1,000 for one year and repay it in one lump at the end.
- Loan A: 10% interest, no fees. Cost: $100. APR: 10%.
- Loan B: 8% interest plus a $30 fee taken out of the loan, so you get only $970. Cost: $80 + $30 = $110 for the use of $970: an APR of about 11.3%.
- Loan B’s lower headline rate hid the fee: by APR, Loan A is cheaper.
Real loans repaid monthly follow the same idea with more arithmetic, and lenders must do it for you.
One level deeper
APR is not the same as APY (annual percentage yield, or effective annual rate). APR leaves out compounding: a card at 24% APR charges 2% a month, and 2% a month compounded is 26.8% a year. Banks quote APY for savings, where compounding makes the number bigger, and APR for loans, where leaving it out makes the number smaller.
Most credit cards have variable APRs: the prime rate plus a margin set by the issuer, so card rates rise and fall with the Fed’s key rate. Many cards also have separate, higher APRs for cash advances and a penalty APR after late payments.
APR has blind spots. It assumes you keep the loan to the end, so if you refinance a mortgage after a few years, its up-front fees cost more per year than the APR shows. And it leaves out some costs, such as late fees.
US credit card and car loan rates since 1994
Average rates at US commercial banks. Card rates sit far above car loans, which are secured by the car; both rose sharply after 2022.
The numbers behind the chart
| Date | Credit cards, all accounts | New-car loans, 48 months |
|---|---|---|
| Q4 1994 | 15.7% | 8.8% |
| Q4 2000 | 16.0% | 9.6% |
| Q4 2010 | 13.4% | 5.9% |
| Q4 2020 | 14.7% | 5.0% |
| Q4 2022 | 19.1% | 6.9% |
| Q4 2023 | 21.5% | 8.5% |
| Q4 2024 | 21.5% | 8.1% |
| Q4 2025 | 21.0% | 7.6% |
| Q3 2026 | 21.2% | 7.5% |
Why it matters
It is the one number that makes loans with different fees and terms comparable.
High APRs compound fast: an unpaid card balance at 21.19% roughly doubles in 3.3 years.
Because most card APRs follow the prime rate, a change in the Fed’s rate reaches card balances within a billing cycle or two.
A common mistake
Myth: The lowest interest rate is always the cheapest loan.
In fact: Not if the fees are high. A loan with a lower rate and big up-front fees can cost more than one with a higher rate and no fees; the APR puts both on the same footing.
Questions people ask
What is a good APR for a credit card?
Card APRs depend on the card and the borrower’s credit score. The average on all accounts at US banks was 21.19% in Aug 2026. Paying the full balance every month means paying no interest on purchases at all.
What is the difference between APR and APY?
APR is the yearly rate without compounding; APY includes it. A card APR of 21.19%, charged monthly, works out to 23.4% a year.
What is a 0% APR offer?
A promotional period, often a year or more, during which a card or loan charges no interest. When it ends the normal APR applies to any remaining balance, and some deals charge back the skipped interest if the balance is not paid off in time.
Read more on BigCapital
About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- US recessions (NBER business cycle dates): National Bureau of Economic Research (NBER), Business Cycle Dating Committee: US Business Cycle Expansions and Contractions.
- Finance rate on new-car loans at commercial banks, 48 months: Board of Governors of the Federal Reserve System, G.19 Consumer Credit, series TERMCBAUTO48NS; retrieved from FRED, Federal Reserve Bank of St. Louis.
- Credit card interest rate at commercial banks, all accounts: Board of Governors of the Federal Reserve System, G.19 Consumer Credit, series TERMCBCCALLNS; retrieved from FRED, Federal Reserve Bank of St. Louis.
- The card rate averages all accounts, including those that pay no interest because the balance is paid in full; it is not seasonally adjusted. “Compounded monthly” and the doubling time assume the rate stays the same and nothing is paid.
- This page explains a term. It is not investment advice.