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Credit Card Interest Rates

All about credit card rates

What’s the most prominent thing on any credit card ad? That would be the credit card interest rate (or APR as we know it). Credit card rates are the most public thing in the credit card world. Many people simply compare the rates of various credit cards and then simply choose the one that offers the lowest credit card rate (or APR). In fact, credit card rates are one of the most important factors (though not the only one) in choosing a credit card. Therefore, it is all the more necessary to understand credit card rates properly.

So, what is a credit card interest rate or APR? Quite simply, credit card interest rate is the interest rate charged by the credit card provider on the amount you owe them. A credit card provider will only charge you interest if you do not pay in full and on time. When you receive your credit card statement, it specifies the full amount you owe the credit card provider. It also specifies the minimum payment you must make (by a certain date) to avoid late fees and other inconveniences. You can choose to pay the full amount or just the minimum payment. If you pay in full (by the due date), you will not be charged any interest. However, if you decide to take the minimum payment or some amount less than the full amount, the credit card provider will charge interest based on the credit card interest rate and the balance amount. This credit card interest rate is the rate you agreed with them when you applied for the credit card. The credit card interest rate or APR is, obviously, an annual percentage rate. The credit card provider uses this credit card APR to calculate the monthly credit card interest rate, and then they calculate the interest on the balance you owe them. The amount of the balance here is simply = the full amount – (the amount you paid). This interest is added to your next month’s balance (at the time of the next billing cycle). If you make another partial payment, the new balance is calculated again and the credit card interest rate is applied (once a month) to calculate the new interest; and it continues until you pay the full amount.

This is where credit card interest rates come into play in this vicious cycle. For this reason, credit card interest rates are known as the most important factor to consider when choosing a credit card.