There are so many credit cards to choose from. How do you make a decision as to which card is best for you? First and foremost, judge a card by its interest rate. Credit card companies offer low rate credit cards and no rate credit cards. They offer no credit credit cards, bad credit credit cards, variable rate credit cards and fixed rate credit cards. A wise consumer can get a 0% apr credit card or a low APR credit card. What exactly is an interest rate? How do you know you are getting a good one?
An interest rate is known, in layman’s terms, as the cost of your credit. The APR, or Annual Percentage Rate is the expression of this cost as a yearly rate. If you pay your balance in full each credit period, you will not pay a fee for interest. However, most people carry a balance on their credit cards and that is where interest rates come into play. Credit card interest rates can be fixed or variable. A fixed rate remains constant and a variable rate may change based on the economic indicator that governs it.
Credit card interest charges are computed based on the average daily balance and may include or exclude new purchases. Credit card companies are required to disclose their interest rate and method of computing interest charges before you apply for their credit card. Be sure to read the disclosure terms carefully so that you are aware of how your interest fees are to be calculated.
Now that you know what an interest rate is, how do you make sure that you are getting the best one available? Generally, you should look for a low interest rate credit card. There are however, some exceptions to this rule. To entice consumers to switch the balances of their high interest rate credit cards, some credit card companies will offer a low introductory interest rate. This rate usually lasts no longer than the first six months to the first year you have the card. After the introductory period has expired, you will be required to pay the card’s normal rate. If this rate is higher than the cards you already have, and you are unable to pay the transfer balance within the introductory period, you may be paying more by switching. Additionally, check to see if the introductory rate applies to new purchases as well as the transferred balance. If not, you may want to transfer the balance only, pay the balance within the introductory period and then cancel the card.
