Credit Card Interest Rates

All of us have received credit card offers through the mail or over the Internet. But before accepting any offer, it’s important to consider which credit cards give you the best, or lowest, interest rate. You can use the information below to determine which card is best for you.

A credit card may have several APRs

Did you know that nearly every credit card features several different interest rates or APRs (annual percentage rates) depending on what type of spending you use them for?

For example, you’ll probably have one rate for purchases, another for cash advances, and still another if you transfer a balance from a different credit card. Cash advance APRs are usually the highest rates while balance transfer rates vary and are often tied to special offers from your credit card company. It’s important to check to see which of the balances your monthly credit card payment will apply to first —purchases, cash advances, or balance transfers. If your balance transfers and cash advance balances will be paid down only after your balance for purchases is paid in full, you’ll want to be very careful about using those credit card features.

Penalty APRs may apply under some conditions

If you are late making your monthly payment (be sure to submit your payment with enough time for it to be processed by your credit card company), a higher interest rate may go into effect on your account permanently as a penalty. Additionally, if you spend in excess of the credit limit set on your card, the APR may increase permanently to a higher rate.

Introductory APRs

Many credit card companies offer an introductory APR as an incentive to apply for their card. This introductory rate will apply for a specific length of time (read the information in the offer carefully), then revert to the standard APR rate for purchases when it expires. Many consumers mistakenly believe that the introductory APR is what the card’s annual interest rate will always be.

The difference between fixed and variable APRs

With a fixed rate, your APR will not change unless you receive written notification from your credit card company of changes to your account. Variable rates are just that — variable, meaning they can change. Most often a variable rate is tied to the prime rate so if the prime rate changes, the rate on your card will change accordingly, either up or down.

Review the offers you receive carefully for details on a credit card’s APRs. Knowing which companies offer you the best rates can save you money in the long run.