Credit cards are a staple in our society. The days of pulling out cash for a purchase seem to be long gone when compared to the ease of just pulling out the magic plastic. But before completing that application and promising to pay what you swipe, let’s learn a little more about credit card interest rates, or APR, and some important considerations around it.

APR (or annual percentage rate), is the yearly cost of your credit card interest, not including any other fees- like balance transfer fees, annual, late fees, etc. Your interest rate and APR are the same, and you are typically charged interest on a monthly basis.

When calculating your APR, or interest rate, different situations and uses will many times trigger different rates as stated in the fine print. Some of the different scenarios you may see interest rate changes it would be:

APR on Purchases

Credit used for new purchases is typically the interest rate you see front and center advertised when applying for a credit card. This would include any purchases made with the card after opening the account. To avoid paying interest, you would need to pay off this amount in total before the due date every month.

APR on Balance Transfers

Many card companies will offer those with great credit the “opportunity” to transfer an existing balance with another issuer, to their card. With this transfer, some will see a “0%” introductory APR for the first 6 months, year, etc. However, when considering this option, take note of what the APR will be on any balance left over after your introductory rate ends as well as any balance transfer fees. Balance transfer fees can be high, eating away at savings your incur by switching. Work these factors into your strategy if you plan to use a balance transfer for a debt payoff strategy.

APR on Cash Advances

Some cards will offer the option to take cash loans out against your credit card balance. Beware, however, that these uses typically carry higher than normal interest rates and less forgiving terms.

APR Penalty Rates

If you are late or miss payments, many card issuers will have terms built into their agreement stating they can raise the rate substantially for this misstep. Pay attention when filling out the application and make sure to make payments on time to avoid these hikes. Also, know that many issuers utilize “variable rates” meaning they can change your rate regardless at any time. Even with a fixed rate, an issuer will still be able to change your rate, there just may be more notice or reason required. Again, pay close attention to the details of the credit agreement you sign up for.

Many people opt to use credit for the convenience and ease of the purchase. What they don’t count on however, is the mounting debt that results from high APR and terms they don’t pay attention to or understand. While credit can be convenient, it can also act as a trap. If you open a card with a low introductory rate or transfer a balance, have a plan to pay off the amount either in full at the end of the billing cycle (new purchases), or a plan to pay off the total balance by the balance transfer introductory end date. By utilizing these habits, you can avoid paying outrageously high APR and keep more of your own money.

If you are looking to snag lower APR and the best introductory deals, keep your credit squeaky clean and avoid any missed payments or hiccups on other accounts. Negotiate high rates with current issuers as well- you never know. Sometimes you just need to ask. Before utilizing credit, do your homework. It is easy to get into debt, but the lessons learned can result in a very costly education.