What You Need to Know About Credit Card Interest Rates
It’s no secret that charge card interest rates are the way credit card issuers make money by loaning cash to consumers through these pieces of plastic. The higher the interest rate on the charge card account, the more cash the bank makes. Which also means the higher the annual percentage rate on a credit card account, the higher the cost to Americans who use it. However, when people ask what your interest rate is on your charge card, they are asking a question that doesn’t make any sense. This is because most consumers who carry balances on credit card accounts have balances spread out across multiple APRs on each card. Here is a list of each different APR people might see on their charge card and what balances get charged that rate:
The Purchase Rate: The purchase rate also known as the standard interest rate on a credit card is generally the only annual percentage rate that Americans know they have. However, this annual percentage rate does not apply to all balances, it only applies to the balances accumulated through general purchases such as groceries or gas. This annual percentage rate generally does not apply to balances accumulated to cash advances, charge card checks or balance transfers.
Introductory Interest Rate: The introductory APR also known as the promotional annual percentage rate is a low rate of interest that will apply to all balances on a credit card account for a short period of time. Introductory APRs are used by banks to lure Americans into choosing their credit card account product over a competing product. These interest rates generally range between 0% and 6% and generally last between 6 and 12 months. Once the introductory period expires, the balances will be charged the annual percentage rate for their specific categories.
What You Need to Know About Credit Card Interest Rates
It’s no secret that charge card interest rates are the way credit card issuers make money by loaning cash to consumers through these pieces of plastic. The higher the interest rate on the charge card account, the more cash the bank makes. Which also means the higher the annual percentage rate on a credit card account, the higher the cost to Americans who use it. However, when people ask what your interest rate is on your charge card, they are asking a question that doesn’t make any sense. This is because most consumers who carry balances on credit card accounts have balances spread out across multiple APRs on each card. Here is a list of each different APR people might see on their charge card and what balances get charged that rate:
The Purchase Rate: The purchase rate also known as the standard interest rate on a credit card is generally the only annual percentage rate that Americans know they have. However, this annual percentage rate does not apply to all balances, it only applies to the balances accumulated through general purchases such as groceries or gas. This annual percentage rate generally does not apply to balances accumulated to cash advances, charge card checks or balance transfers.
Introductory Interest Rate: The introductory APR also known as the promotional annual percentage rate is a low rate of interest that will apply to all balances on a credit card account for a short period of time. Introductory APRs are used by banks to lure Americans into choosing their credit card account product over a competing product. These interest rates generally range between 0% and 6% and generally last between 6 and 12 months. Once the introductory period expires, the balances will be charged the annual percentage rate for their specific categories.
Tips to Comparing Credit Card Accounts
It is no secret that credit card accounts have become an important aspect of the average consumers lifestyle. As a matter of fact, statistics say that currently the average consumer carries a few thousand dollars in charge account debt. However, for those consumers who are new to charge card, it is important that they choose the best account for them when they pick their first one. Unfortunately, there is no class in school that Americans can use to learn what charge card will be best for them, however, I will try my best to give the tips that can help. Here are the steps to comparing charge card accounts:
Step 1: The first thing that consumers should do when comparing charge card applications is get a copy of their credit report. This is because each individual credit card product is designed for people of a specific range of credit worthiness. Americans with higher credit scores tend to qualify for lower APRs and better rewards whereas consumers with lower credit scores tend to qualify for higher annual percentage rates and less rewards. When comparing credit cards, Americans should first make a list of all the card accounts they may actually qualify for.
Step 2: Now it is time to narrow that list down a bit. The next thing that people will want to look at when comparing credit cards is the APR on the account. The APR is the rate of interest that the bank will charge Americans when borrowing money using their credit card account. The higher the interest rate on a card, the more money it will cost consumers to borrow cash using the card. The lower the interest rate the less money borrowing will cost! At this point, people should cross out the high interest rate charge card accounts on the list. These will cost too much money to borrow against.