APR is important to the daily routine of our credit card, but many of us wouldn’t realize that APR is in fact floating from year to year. Why APR varies from year to year?

Many credit card companies will first attract customers by giving them a relative low rate of introductory APR, but after the discount period, our APR would return to the normal level, and this normal level is highly related with market conditions.

In our country, APR, just like many other interest rates, are decided by U.S. Prime Rate. U.S. Prime Rate is decided by Federal Bank, the central bank, and the Prime Rate is affected by lots of indexes as well as exports and imports situation.

After that, banks would add some margins on Prime Rate to ensure that they could make some profit through issuing credit cards to their customers. Some banks even offer a non-variable APR, which means it might be a lot higher than Prime Rate that it could keep in a constant rate.

In short, APR is decided by both market conditions in this country and the margin that bank charges. So the formula of how the rate is set as follows:

Prime Rate + The margin rate that the bank charges = Annual Percentage Rate.  

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