Fixed

• Fixed APR accounts are consistent. Only long-term economic factors, such as an increase in federal interest rates, can alter fixed APRs. By law, businesses must give advance notice of potential rate increases to customers with fixed-rate APR accounts. When interest rates decrease, fixed-rate accounts are not immediately impacted. Lending institutions and credit card companies offer consumers fixed-rate APRs. As of April 2011, to receive a favorable rate, consumers must have a credit rating above 700.
  
  

Variable

• Variable APRs are the most common among consumers. Indexes including the Prime Rate or London Inter-Bank Offer Rate control variable APRs. When prime rates decrease, variable rates also decrease. Variable APRs can change on a daily basis. Advance notice is not required when variable interest rates increase. Difficulties arise for consumers when prime rates increase and payments must also increase. To better track rate fluctuations, note which interest rate the financing is associated with. Loans, bank and credit card accounts offer consumers variable APRs.
  
  

Tiered

• Account balances determine tiered APRs. Larger balances mean a higher APR. Consumers who carry low balances into the following month benefit greatly from tiered APRs. Financial planners recommend avoiding tiered APRs. Missed payments result in an increased APR, resulting in higher monthly payments. Some credit card companies practice tiered APR financing. Utility companies also use tiered APRs for monthly billing. Late fees accessed on unpaid amounts from the previous month increase as the balance due increases.
  
  

Penalty

• Consumers pay penalty APRs after consistently missing payments or making late payments. Businesses must clearly outline penalty APRs in their customer-agreement documents. Avoiding penalty APRs is a simple task. In addition to paying bills on time, never exceed your credit line and make an effort to pay more than the minimum amount due. In some cases, penalty APR amounts double the monthly billing amount. Make sure payments go through to avoid penalty APRs. Be sure funds are available to clear any checks written.