Credit card rate
All about credit card rate
What’s the thing that is most prominent on any credit card
ad? Well, it’s the credit card rate (or the APR, as we know
it). The credit card rate is the most publicized thing in the
world of credit cards. A lot of people just compare the credit
card rate of various credit cards and just go for the one that
is offering the lowest credit card rate (or APR). Credit card
rates are, in fact, one of the most important factors in the
selection of a credit card (though not the only factor).
Therefore, a proper understanding of Credit card rates is even
more necessary.
So, what is a credit card rate or APR? Very simply, credit
card rate is the rate of interest that the credit card supplier
will charge you with on the amount you owe them. The credit
card supplier will charge you an interest only if you don’t
make full payments in time. When you receive your credit card
bill, it specifies the full amount you owe the credit card
supplier. It also specifies the minimum payment that you must
make (by a particular date), in order to avoid incurring a late
fee and other inconvenience. You have the option of making
either a full payment or just the minimum payment. If you make
a full payment (by the due date), you are not charged any
interest. However, if you decide to go with the minimum payment
or some amount that is lesser than the full amount, the credit
card supplier will charge interest based on the credit card
rate and the balance amount. This credit card rate is the
interest rate that you agreed with them at the time of applying
for the credit card. The credit card rate or the annual
percentage rate, as is obvious, is an annual interest rate. The
credit card suppliers use this annual credit card rate to
calculate the monthly credit card rate and then they calculate
the interest on the balance amount that you owe them. The
balance amount here is simply = Full amount – (payment made by
you). This interest is added to your balance for the next month
(at the time of next billing cycle). If you again make a
partial payment, the new balance is calculated again and the
credit card rate (monthly one) applied to it for calculation of
new interest; and it keeps going on and on until you make the
full payment.
That’s how credit card rate acts in this vicious circle.
Hence, credit card rate is termed as the most important
consideration in choosing a credit card.
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