What is APR (annual percentage rate)?
APR (annual percentage rate) is the yearly interest rate a credit card charges on a balance you carry. Nearly all card APRs are variable, so they rise and fall with the prime rate, and most cards set separate APRs for purchases, balance transfers, and cash advances. Pay your full statement balance by the due date every month and the purchase APR never costs you a cent, because of the grace period. Interest only starts once you carry a balance past the due date.
How it works
Issuers charge interest daily, not once a year. They take your APR, divide it by 365 to get a daily rate, and apply it to your balance each day. Say you carry a $1,000 balance on the Chase Freedom Unlimited and land at a 24.99% rate (its purchase APR runs 18.24% to 29.99% variable). That comes to roughly $21 in interest that month, and about $250 over a year if the balance stays put. Many cards also run a 0% intro APR window before the regular rate kicks in. The Freedom Unlimited gives 15 months at 0% on purchases and balance transfers, and the Wells Fargo Active Cash gives 12 months. During that window a carried balance costs you nothing, then the standard variable APR takes over.
Why it matters when picking a card
APR is the biggest number on the card if you ever carry a balance, and close to irrelevant if you never do. Pay in full every month and you can ignore it, then pick on rewards and fees instead. Carry a balance and the math flips hard. A 2% cash-back rate means nothing next to 25% interest, and a $200 signup bonus vanishes in a few months of carried debt. If you're financing a big purchase or paying down existing debt, a long 0% intro APR window (15 months on the Chase Freedom Unlimited, 12 months on the Wells Fargo Active Cash) saves you far more than any rewards card, as long as you clear the balance before the regular APR starts.