Credit Card Interest Rates

Factors to consider when dealing with credit card interest rates

Before choosing a credit card it is important that you understand the terms and conditions. You may feel you do not want to pay off your outstanding balance each month however should consider the interest rates that will be charged.

When choosing a credit card there are many factors to consider regarding interest rates.

Below are a few things which you must know:

• The introductory rates charges – There are many credit card companies who offer a good introductory rate. credit card providers will charge a low rate as 0% and the introductory period varies from a few months to one year.

• It is best to check the following things when an introductory rate is quoted by a provider:

  What is the length of an introductory period? – Is it for a certain date or a set period once the credit card is received? – Providers who offer a date can be misleading as you could be waiting for the credit card and also takes time to transfer the balance therefore taking up much of the time of the low interest period.

  What is the introductory rate in conjunction with? Does it apply to a transferred balance only or new purchases?
  
  - Once the introductory period is completed, what will the interest rate be?

Transferring money from one account to another is known as ‘surf’. People use this service to benefit from providers introductory rates.

• The interest free period – Is there an interest free period with the credit card?  Interest on many credit cards is charged normally from the statement date. There are  providers who calculate the interest rate from the date of when the transaction was  made. Is there a minimum or a maximum interest free period? There is not a minimum  interest free period however the maximum is 56 days.

• The usual interest rate – During any introductory rate, what is the interest rate charges? Interest rates tend to increase and decrease. In the year 2001, the APR,  which is also known as Annual Percentage Rate, varied from 7.5% to about 30%.

• Making cash withdrawals – The interest rate for ‘cash advances’ is much more than  the interest rate, which applies when making a transfer or even making new  purchases. The interest is charged from the date of the cash advance , for cash  advances, there  are no interest free periods, this is simply because you can then be  able to borrow  interest free for a unlimited time by using two credit cards and  withdrawing money on one credit card to pay the other one every month.