Credit Card APR: What You Should Know

By deSita Anwarhee

Credit Card APR. Governments and the Financial Regulators recognize that for most people to understand and compare between different financial products such as credit cards are very complicated. Therefore they put in some precautions to protect consumers and to make certain they have some standard information to compare different credit card interest rates and other associated charges.

The Credit Card APR that stands for Annual Percentage Rate is the interest amount a customer will pay annually. It attempts to make a single figure of interest and finance charges so the consumer can make a comparison like with like. APR differs from credit card to credit card, sometimes it’s fixed, and sometimes it changes from month to month. But if you pay the bill in full every month then there will not be an APR fee applied.

People with good credit are typically offered credit cards with low APR. People with poor credit will have much higher APRs. Rates will vary from 3 percent for good credit customers and up to 21 percent for people with poor credit.

However, most credit card companies compound interest rates. This means that your credit card fees will be higher than just this straight interest charge, particularly if you carry a balance on your cards. If you have a balance you will also be charged interest on any interest charges that are not paid from the preceding month.

Some companies might change your credit card APR if you fail to make payments, or they may decide the APR based on your current credit history. Some credit card companies have an introductory rate for their APR, and after so many months this rate may go up dramatically.

It is significant to read fine print for each card because terms and APR is different for each card. If a credit card company charges a fixed rate that means that your credit card APR may change, but the company is required to give you notification of a specific number of days.

If a credit card company offers a variable interest rate, this means that your interest rates will change according to interest rates generally. They may change from time to time. It is most likely attached to another interest rate, such as the prime rate. If the prime rate changes your credit card rate may change also.

Always check what the APR is of any credit card you are considering. The credit card APR directly impacts on how expensive it will be to carry a balance on a credit card. You’ll be able to save money in the long-term by recognizing exactly what you’re receiving from the credit card provider.

Chek out our other credit card guide on Bad Credit Credit Cards.

Understanding Your Credit Card Interest

By deSita Anwarhee

Credit Card Interest. Credit card suppliers now use many different methods of charging interest. If you pay your bill fully, this usually won’t affect you. But if you withdraw some cash with your credit card, or pay anything less than the full amount on your statement, you’ll normally be charged interest.

To calculate your credit card interest each month, the lender multiplies the credit card interest rate (the APR) times your credit card balance. This will give the interest for the full year. The lender will divide this interest calculated by the number of months in the year. The sticky part is calculating the credit card balance.

If you had two cards with the same interest rate and used them in exactly the same way, one could end up costing over twice as much as the other just because it calculated your interest differently. The reason for this is that card suppliers start and stop charging interest on transactions at different times.

If you do have a balance on your card, there are three methods of calculating it:

Average Daily Balance: the issuer calculates the balance by taking the amount of debt you had in your account daily during the period covered by the billing statement and averaging it.

Previous Balance: The issuer uses the balance outstanding at the end of the previous period that is, the period prior to the one covered by the current billing statement.

Adjusted Balance: the balance is calculated by subtracting the payments you’ve made from the previous balance.

Different transactions attract different credit card interest rates. Common rate that you will find on your credit card interest:

• purchase rate: Unless you pay off the balance fully each  month, you’re charged credit card interest on the value of purchases made with the card
• cash withdrawal rate: When you get cash advance, normally a higher rate of interest is charged, and  you’ll normally be charged from the day you make the withdrawal, even if you pay off the balance in  full.
• transfer rate: Most cards offer a reduced introductory rate for a debt transferred to the card  from elsewhere.

Holding a credit card balance actually negates any investment gains and can be very costly. The best way is just to pay off your balance entirely.  Paying the interest rates that credit card companies charge simply does not make sense if you have savings elsewhere. If you can’t completely pay off your balance, increasing your monthly payment will be very helpful in the long-term.

Chek out our other credit card guide on Bad Credit Credit Cards.

Bad Credit Card offers

By deSita Anwarhee

Bad Credit Card. Most people receive more credit card offers than they can remember. These offers come in  brightly-printed text with extraordinary offers of low percentage rates. Whether it’s being pre- approved for $10,000, or the promise of earning free airline tickets, there’s always something that  lures us in.

Before applying for these offers, it’s important to know what they actually mean. Since usually  the offers are not as beneficial to the consumer as they appear and can be considered as bad credit card offers.

Introductory Offers Limitations

The main problem that people don’t notice about these deals is that they seem to be all well and  good. These offers that is printed in large type are typically only introductory offers that valid for a  set amount of time.

Many low introductory APRs are only for the amount that is transferred from other credit cards. It  is important to know if the lower interest rate is for any purchase that is made during the  introductory period or only for transferred balances.

Oftentimes 0% APR offered is only valid for 12 or 15 months. After that, the percentage rate goes  back to a normal rate that is usually based on a person’s credit rating. Cash advances also  usually do not get the same low introductory APR as purchases. If a cash advance is taken during  the introductory period, it is commonly subject to a higher percentage rate.

Terms and Conditions

The bottom line on introductory offers for credit cards is to understand what exactly the offer  entails. To get the best deal, you should know what the main terms mean.

APR (Annual Percentage Rate): Yearly percentage rate charged when a balance is held on a  credit card. This rate is applied each month that you carry a balance (the lower APR, the better).

Grace Period: A period of time during which you’re allowed to pay your credit card bill without  being charged for a late fee. This period is usually 10-28 days.

Annual Fee: Yearly fee associated with having the credit card. Unless you are getting rewards or  miles, or something extra, you may want to look for a card without an annual fee.

Default on Payment: Missing a payment, that also usually means that the introductory period  comes to an immediate end. The percentage rate for the total outstanding balance goes to a  default interest rate that is usually about 20%.

It is also important to note that these limitations on introductory rates do not necessarily make  them as a bad credit card offers. If a person is trying to pay off high interest credit card debt that  can be done within the time of the introductory APR, then it can be a very good thing.

Chek out our other credit card guide on Bad Credit Cards.