Some Interesting Facts About Credit Card APR You Must Know
When shopping for a credit card, the very first thing that you should look for is the APR. The Annual Percentage Rate (APR), is a major determinant of how much money will go out of pocket of you fail to pay your bill on time. Therefore, before you select a particular card, it is very important to check the APR as it is a crucial number to consider when it comes to making your credit card choices. By comparing the APR of different credit cards offered by different companies, you can easily determine which credit card is more appropriate for your present financial condition. Why would you opt for a card that will cost you more on your wallet? Shop around and be an educated customer so that your credit card companies do not dupe into accepting a high APR credit card. Agreeing to a high APR may force you into paying huge monthly payments and inability to make the payments may require seeking consolidation help.
How do credit card companies calculate your APR?
The finance charges or the interest rate that you have to pay on your credit cards are determined in two simple ways, as the periodic rate and the annual percentage rate. If you want to calculate your monthly interest rate, you just need to divide the annual percentage rate by 12. There are some cards that even carry daily periodic rate. This can be calculated by dividing the APR by the number of days in a year.
How does the credit card APR affect your credit card bills?
If you’re into the habit of not making your credit card payments in full every month, the annual percentage rate can affect the amount of money you give the credit card company for using their money for a short period. Similarly, if you have bad credit, you may be charged with a high credit card APR of about 21%. Since the credit card companies become skeptical about your making regular payments, they charge you with high interest rates so that you make the payments on time to avoid huge late fees and penalties. However, if you own a good credit score, you can easily shop around for a low interest rate, even to the extent of 7%. Try to purchase within the credit card limit or else you may again be charged with over-the-limit fees.
How would you make the APR benefit you?
There are a little tricks that are associated with making your credit card APR benefit you in multiple ways. If you cannot get a card that is tailored to meet your financial needs and a card with a low APR, you can still get to reap the benefits of low interest rates. For this, you require making more than the minimum monthly payment each month. The longer you take to pay off your credit card debt, the more interest you accrue with time. Therefore, simply making the minimum monthly payment will not help you out. Make the financial effort to make a payment more than the minimum allotted each month. If you cannot afford to make large monthly payments, try your best to obtain a card with a low interest rate.
Thus, if you do not want to seek the help of consolidation services to eliminate your debt burden, you need to educate yourself on the interesting facts on credit card APR. Stay aware of how it is calculated and how you can avoid paying huge rates annually and safeguard yourself against credit card debt.