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Finance Charges Annual Percentage Rate (APR) is the coast of credit. If you carry an unpaid balance, the APR is the best indicator of account costs. The higher your APR, the more you will pay in finance charges. As an APR 18% on purchases doesn't mean your paying 18% every month. It's what you would pay over the course of a year. With an 18% APR, each month you would be charged 1.5% as a finance charge on the open balance. Your APR may be tied to a specific index such as the Prime Rate. This means that your rate is "variable" and can move up and down over time. Your rate also changes as described in your Cardmember Agreement or upon written notice from the company. You can avoid finance charges on purchases and late fees by paying your balance in full each month by the payment due date. But sometimes you may want or need to make a big purchase that you can't pay off all at once. That's one of the main reasons to have a credit card-it lets you carry balance. Make sure when you're planning a large purchase to factor the payments into your budget. This way you can plan how long it will take to pay of the purchase. Don't forget to calculate how much in finance charges you'll pay, too. That becomes part of the purchase cost. Finance charges can be calculated in different ways. Your account statement describes the method that applies to you. In general, finance charges are based on one of the methods below: Average daily balance: Many credit card companies use this method. The credit card company totals your balance each day during the billing period, adds these daily balances together and divides by the number of days in the period. Adjusted balance: The credit card company subtracts payments you make during the billing period from your balance at the beginning of that period. This means your balance is kept lower and you pay less in finance charges. Previous balance: This method applies the monthly finance charge to your beginning balance for the billing period. Purchases and payments during the month aren't included.

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