You may have seen the term APR, or annual percentage rate, used in reference to everything from mortgages and auto loans to credit cards. Understanding how APRs work can help you make more informed decisions about credit cards and loans. Here’s what you need to know.

APRs are calculated for you by lenders. It’s important to remember that different lenders may include different fees. When comparing APRs, make sure you consider what fees are included. If you want to run the numbers yourself, you’ll need to know the fees, total interest to be paid over the life of the loan, principal and number of days in the loan term. Here’s the APR formula:

Credit cards may have either fixed or variable APRs and will usually have different APRs that apply to different types of transactions, such as purchases, balance transfers and cash advances. Some offer low APRs as limited-time promotions. Many have penalty APRs, which kick in if you miss payments or otherwise violate the terms of the credit card agreement. Check your monthly statement and cardholder agreement for additional information on how each APR is applied. Here’s a look at some of the APRs:

Generally, credit card companies don’t charge interest on purchases if you always pay your outstanding balance by the due date. If you carry a balance, each purchase usually begins accruing interest on the day the transaction is made. The accrued interest is added to your outstanding balance at the end of each billing period.

The formula to determine how much interest you owe on your outstanding balance may vary by creditor. Here’s a common calculation for interest on purchases:

Let’s say your credit card’s APR for purchases is 20 percent and your average daily balance for purchases during a 25-day billing cycle is $2,000. You can find the APR, average daily balance and days in the billing cycle on your credit card statement.

First, determine your daily periodic rate by dividing the APR by 365 days.

Next, multiply the average daily balance by the daily periodic rate, and then multiply the result by the number of days in the billing cycle.

So, if these numbers applied to your credit card account, you would owe $27.40 in monthly interest.

If your account has different APRs for different transactions, you need to do the calculation for each one. The interest charges for each APR are broken out on your credit card statement, but you might want to do the calculations before the statement date to get an estimate of what you’ll owe.

One of the most important things you can do is maintain a good credit score. Credit card issuers consider many different factors, including your credit score, in evaluating an application and determining the APRs that will apply. Paying your bills on time, not letting your accounts get close to their maximum credit limits, and monitoring your credit reports are just some of the ways you can help maintain or improve your credit score. Generally, people with better credit scores get better rates than people with lower credit scores.

While a better credit score may be the surest way to lower APRs, getting there can take some time. Here are other actions that can lower your APRs faster:

Some banks and credit card companies will consider requests for lower APRs. Others routinely review accounts to see if a lower APR is warranted. In either case, you have a better chance of getting a lower APR if you consistently pay on time or have taken steps to improve your credit score, such as paying off a big balance.

Many credit cards offer low promotional or introductory rates on balance transfers. Check if your existing cards have any offers or investigate opening a new card with a low rate. While opening a new card could temporarily hurt your credit score, you’ll be better off in the long run as long as you pay off the balance before the promotional rate expires. You should also make sure that the savings from the lower APR is greater than the balance transfer fees, which usually are 3-5 percent of the amount transferred.

Refinancing might be an option for your home and auto loans if interest rates have fallen since you took them out. It also helps if your credit score has improved. When you refinance, you’re paying off the old loan with a new one, so the home or auto needs to be worth more than you owe. You will have to go through the approval process again and pay any associated fees.