APR Explained: What It Really Costs to Borrow in the UK

TL;DR: APR (annual percentage rate) is the yearly cost of borrowing, including interest and mandatory fees. The advertised “representative APR” only has to be offered to 51% of successful applicants, so up to 49% can be offered a higher rate. Paying only the minimum on a card keeps you in debt for years: £1,000 at 24.9% APR with £25 monthly payments takes over 7 years and costs about £1,150 in interest.

What representative APR actually means

When you see “24.9% APR representative”, the lender only has to give that rate (or better) to 51% of the people they accept. The other 49% can be offered something higher. Your personal rate depends on your credit history, which is why two people can get different rates on the “same” card. The FCA consulted in April 2026 on whether this rule should change, so it may not last in its current form.

How the interest is calculated

A rough monthly figure: divide the APR by 12 and apply it to the balance. At 24.9% APR, £2,000 of card debt costs about £41.50 a month in interest before you have repaid a penny. That is why minimum payments are dangerous: a typical minimum barely covers the interest, so the debt shrinks very slowly.

The minimum payment trap

Illustrative example: £1,000 owed at 24.9% APR, paying £25 a month. It takes roughly 86 months (over 7 years) to clear, with total repayments of about £2,150, meaning roughly £1,150 of that is interest. Paying £50 a month instead clears it in about 26 months with roughly £300 of interest. If you pay only the minimum for 36 months, FCA rules require your lender to contact you with a plan to repay within a reasonable period.

Section 75: the protection most people forget

Under Section 75 of the Consumer Credit Act 1974, your card issuer is jointly liable with the supplier for purchases costing over £100 up to £30,000. Pay even a small deposit on the card and the whole purchase is covered, including if the retailer goes bust. It covers goods, services and holidays, at home or abroad. Debit cards do not get this (they have chargeback instead, a weaker scheme). And since BNPL became regulated on 15 July 2026, regulated BNPL purchases in the same price band can now attract Section 75 too, something most guides still say is impossible.

Frequently asked questions

Is a lower APR always the better card?

Not necessarily. If you clear the balance in full every month, the APR is irrelevant and rewards or cashback matter more. APR matters when you carry a balance.

Why was I offered a higher APR than advertised?

Because of the 51% rule above. The advertised rate is representative, not guaranteed. This is normal, though the FCA is reviewing whether the rule should change.

Does checking my eligibility affect my score?

Eligibility checkers use soft searches, visible only to you. The full application is a hard search. Check your score free first.

APR vs interest rate: what is the difference?

The interest rate is just the interest. APR rolls in mandatory fees too, which is why it is the better number for comparing borrowing costs.

Illustrative examples are simplified. General information, not financial advice. Facts checked 1 October 2026. Sources: FCA, MoneyHelper.