Credit Card Rate
All about credit card rate
What is the most prominent item on any credit card ad? Well, it is the credit card rate (or the interest rate, as we know it). The credit card rate is the most publicized item 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 interest rate). 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 interest rate? Very simply, credit card rate is the rate of interest that the credit card supplier will charge you on the amount you owe them. The credit card supplier will charge you interest only if you don’t make full payments on 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 charges. 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 calculate the interest on the balance amount that you owe. Simply, the balance amount = Full amount – (payment made by you). This interest is added to your balance for the next month (at the time of the 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 that balance again for calculation of new interest; and it keeps going on and on until you make the full payment.
Again, this is how the credit card rate acts in this vicious circle. Hence, the credit card rate or interest rate is considered the most important consideration in choosing a credit card.
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