Question

What is the APR? Credit cards often advertise the monthly interest rate rather than the APR. Use this example to explain why they do so: Suppose a credit card company advertises an interest rate of 3% per month. What is the APR for this card? Which sounds more appealing, the monthly rate or the APR?

Answer 1

When the credit card companies are advertising by monthly rate then the customers may think that the company offers at very low rate.

But most of the customers does not recognize or calculate the actual rate of interest per year will be high when compare with other credit card companies.

So in the given example the company offers only 3% per month, but the actual APR is 3x 12 = 36% per annum.

So this was offered at very high rate but when coming for monthly the customers may think it was 3% per annum. So monthly rate is more effective than the APR