Apply for a Credit Card: Knowing What Credit Card Rates are
If you are thinking about applying for a credit card the most important thing that you should know are the rates. It is important to know what rates are and how you can get the best rates.
Rates on credit cards simply determine the amount of interest that will be added to any purchases on your credit cards. If you pay off your balance every month then you will never be charged interest so you don't have to worry so much about interest rates. However, if you're like most Americans you will not be able to pay off your full balance every month, so this is important information to know. It is also important to know that there are often times different rates for different things on the card. There is the main rate that is charged to purchases made on the credit card. However, there are also rates, often times different, for balance transfers or cash advances.
Credit card interest rates are on an annual basis. This is called your annual percentage rate or APR. There are two different kinds of APRs. The first kind of APR is a fixed rate. This is where your rate will always stay the same no matter what. The fixed rate is an agreement that you make and the only way it can be changed is if the bank or credit card company that supplies you the card amends the contract. However, you must be notified in advance if they are planning to do this. Most credit cards nowadays have fixed rates.
The second kind of APR is an on-going rate or a variable rate. This interest rate can change from month to month depending on the economy. Your interest rates can be really low when the economy is doing quite well, but can go up at any time.
Your fixed or variable rate will also depend on the consistency of your payments. If you do not make your payments on time you may be subjected to a higher interest rate. This information is in the contract but is usually in the fine print so many people do not read it. However, it is very common for banks or credit card companies to change your rates if you make so many late payments each year.
If you are going to get a credit card it is important that you educate yourself about rates. If you are thinking about getting a variable rate then you should be aware of what the economy is doing and how that will affect your interest rate. You should also know how much of a balance you are estimating you will carry over each month. This way you can have some sort of indication as to how much interest you will be paying each month on your credit card. Although a 10% rate may seem quite high if you balance is relatively low you won't be paying much in interest because you are paying an annual percentage rate.
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