Credit Card Glossary: Terms and Definitions

Interest rate

An interest rate is the price a lender charges for loaning money. On credit cards, interest rates are a little trickier, because lenders set multiple interest rates. For example, you may have a low, teaser (introductory) rate when you open an account, followed by a higher standard rate for purchases, which turns into a penalty rate if you pay late. So you may end up owing a balance to a credit card company with multiple interest rates. Interest rates on credit cards are expressed in a standardized way so consumers can more easily compare cards. That standard way is known as the APR, which stands for annual percentage rate. With credit cards, the interest rate is calculated on the basis of your average daily balance times the rate. Credit card interest rates are expressed in a standard way as an annual percentage rate (APR).