What is APR?

The short answer

If you have arrived here from a US or UK article, or from an internationally-marketed financial product: Australia does not use APR as its primary disclosure. The equivalent role is played by the comparison rate.

You will still encounter the term. Some credit card issuers use it, and any product marketed across borders will.

What APR means where it is used

APR expresses the annual cost of borrowing as a single percentage, folding in the interest rate plus certain compulsory fees. Its purpose is to make a rate-plus-fee offer comparable to a rate-only offer.

APR = the rate at which the present value of every repayment equals the money you actually receive

That is the same underlying idea as a comparison rate. The difference is what each is calculated on.

APR versus comparison rate

Because a comparison rate is worked out on a standard example, it is highly comparable between lenders and only approximately applicable to your loan. An APR is calculated on the specific credit contract, so it is closer to your actual cost but less directly comparable across different loan sizes.

Credit cards in Australia

Australian credit card issuers quote an annual interest rate for purchases, and usually a separate, higher rate for cash advances. There is normally an annual fee on top, quoted separately.

Cards do not carry a comparison rate in the way loans do, so the comparison you need to do yourself is: the purchase rate, the cash advance rate, the annual fee, and any interest-free period conditions.

The credit card interest calculator will show what a carried balance costs at a given rate. See also how credit card interest works.

Working out your own effective rate

Whichever market's convention you are looking at, the underlying question is the same: what does this cost in dollars, and what annual rate does that represent?

The APR calculator answers it from your actual figures — amount, term, fees and either the rate or the repayment. That gives you a number specific to your loan rather than to a regulatory example, which is the right basis for deciding whether a deal is good.