Credit Card Rates And APR's

Do you know how much you are really paying in credit card interest?

What’s the thing that is most prominent on any credit card ad? Well, it’s the credit card rate (or the APR, as we know it). The credit card rate is the most publicized thing 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 APR). 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 APR? Very simply, credit card rate is the rate of interest that the credit card supplier will charge you with on the amount you owe them. The credit card supplier will charge you an interest only if you don’t make full payments in time.

Annual percentage rate (APR) is an expression of the effective interest rate that the borrower will pay on a loan, taking into account one-time fees and standardizing the way the rate is expressed. In other words the APR is the total cost of credit to the consumer, expressed as an annual percentage of the amount of credit granted. APR is intended to make it easier to compare lenders and loan options.

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 inconvenience. 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 they calculate the interest on the balance amount that you owe them.

The balance amount here is simply = Full amount – (payment made by you). This interest is added to your balance for the next month (at the time of 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 it for calculation of new interest; and it keeps going on and on until you make the full payment.

That’s how credit card rate acts in this vicious circle. So, credit card rate is termed as the most important consideration in choosing a credit card.

What Do You Need To Know to Apply for a Credit Card?

All credit cards are not the same. You need to find one that matches you and your spending habits.

Since finances, especially money is one of the major concerns of many people, a wide array of financial management services and financial options emerged. One of the most visible among the unending line of financial management services there are is the credit card.

When people apply for a credit card, there is always a reason. It can be for managing their finances, needing extra money or in preparation to a big expenditure. But, no matter what the reason is, people apply for a credit card because of the ultimate convenience it brings.

By now, you may have had your share of ‘pre-approved’ credit card offers in your virtual and physical mail. Since people are quite vulnerable when they apply for a credit card, some credit card issuers lure these people by giving low introductory APR, no annual fee offers among numerous perks. The tendency of this so many alternatives and “value” deals is to sway the person who wants to apply for a credit card.

There are undeniably endless lists of pros and cons when you apply for a credit card, but if you really have decided to apply for a credit card, these are some of the helpful tips that can guide you on your credit card shopping journey.

Actually, there are three easy steps you should follow if you have decided to apply for a credit card. First, surf the net and do some research on credit cards. By doing this, you can familiarize yourself with different credit card terms and types. Second, you can compare numerous credit cards that would best serve your needs and lastly, you may now apply for the credit card of your choice by filling out a credit card application by visiting a bank representative or through online.

In order to find the right credit card fast and easy, first, before you apply for a credit card, make sure you mastered the credit card terms. When you apply for a credit card you must know what a “credit card” really is. Being a form of borrowing that involves charges, credit cards usually have underlying credit terms and conditions affect your overall cost.

So, it’s best to compare terms and fees before you apply for a credit card and agree to open an account. Some of the important terms to be understood well include the annual percentage rate or the APR.

When you apply for a credit card, you must know how the APR affects your credit account. Being a measure of the cost of credit expressed as a yearly rate, the APR should be disclosed before you apply for a credit card so that you would not be obligated on the account and on your account statements later on. Aside from APR, the periodic rate must be disclosed to the card holder before they completely apply for a credit card so they would have an idea of their outstanding balance and finance charge for each billing period.

Other important terms to know before you apply for a credit card are free period or “grace period,” annual fees, transaction fees and other charges, other costs and feature, and balance computation method for the finance charge like average daily balance, adjusted balance, previous balance, and two-cycle balances.

If you’re not that type of person who is patient enough to research on all these terms, make sure that before you apply for a credit card, the issuer will give an explanation how the balance is computed and it must appear on your monthly billing statements.

How To Get Out Of Debt More Quickly

It won't happen over night, but you can get out of debt and do it a little faster if you follow these steps.

Pay more than the required payment (make extra payments in the manner your lenders prescribe – so you don't lose out because of computer errors, etc.) – focus on your highest rate debt first.

Bi-weekly payments are an excellent means to pay extra principal almost painlessly – if your paydays are weekly or bi-weekly, and if there are no fees involved, and if you deal with a reputable money handler. A person who pays ½ of the required monthly payment bi-weekly makes the equivalent of 13.051 payments in an average year. The person who does so, pays the loan off early, and pays significantly less interest – especially on a mortgage loan (a person who pays a ½ payment bi-weekly can reduce a 30 year mortgage by more than 7 years, and save many thousands of dollars in interest). If you wish to match the bi-weekly advantage, but still make monthly payments, multiply your required monthly payment by 13.05 and divide by 12. Pay that amount each month.

Highest rate debt first. If you have several debts, pay as much as you can on you highest rate debt and the minimum required payments on your other debts. As you pay off one debt, add the amount you were paying toward it to your next highest rate debt, and so on.

Often times, this technique is much more effective and efficient than refinancing – even at a lower rate.

If you receive a pay raise or a bonus, apply most of it towards any debt that you have. You already know that you can live without the extra money. Put it to good use and draw down some debt.

If you have the opportunity to work some overtime, use that money to help pay off your debt. Consider taking a second job to earn some money to help pay off your credit card debt.

Clean out your closets and have a yard sale or sell on eBay. Take the profit and pay off that debt.

Cut every corner that you can. Make your lunch at home and bring it with you to work. Skip the coffee, soda or candy bar that you normally have every day.

Throw your change in a jar at the end of the day. Every month put the money in the bank and use it help pay off your debt.

Go an extra week or two without that haircut. Don’t go out to the movies (or at least cut back). Cancel your cable subscriptions.

If you have a home phone and a cell phone, get rid of one (I cancelled my home phone years ago).

Look around. I am sure you can find ways to cut back and save an extra hundred or two hundred dollars each and every month. Use this to pay down that debt and get out of the hole.

If You Really Must Borrow

Before you borrow, compare! Find the best deal available to you.
Pay close attention to the Annual Percentage Rate (APR). The APR is extremely useful as a comparison tool.

Always try to beat 13% APR. Usually you can beat it by a lot (if you keep your credit good)!

Each state has different laws about interest rate ceilings. Check your state to see what the maximum interest is that can be charged.

“Easy loans” are available with outrageous costs. Avoid them like the plague!

If you aren’t in the habit of paying off your credit cards each month, get in the habit!

When you do pay off your cards each month, you pay no interest (most credit cards). If you're accustomed to the dangerous reasoning: “I still have unused limit”, get over it! Use the wise reasoning: "I don't charge things with my credit card unless I have the money lined up."

Watch out for exceptionally “low” or “no interest” offers. Pay close attention to the “fine-print” terms and costs. Beware: artificially low rates are often offset by increases in other costs.

Beware of advertisers' claims:
a. “Cash out your equity” also means: Get deeper in debt, risk losing your home.

b. “Put your equity to work” also means: Get deeper in debt, risk losing your home.

c. “Pay off high-rate credit cards” can mean: Lose your equity and jeopardize you home because you goofed up and ran up credit card debt.

d. “Unlock your home equity with our credit card” means: Get deeper in debt & risk losing your home with an incredibly easy way to spend money.

e. “Refinance and save” usually means: lose equity and pay us more interest.

Pay early or on time to avoid late fees. Late fees can change a loan with a reasonable rate to one of an outrageous effective rate! Consider yourself late if you aren’t early.

To avoid bad credit, always make your payments before they are due. Bad credit is not only expensive because of late fees, but it is also expensive because of increased cost of future debt.

If you’ve already been financially smashed, hang on until you can bounce back, or get help.

Before applying for a loan (especially a mortgage loan), compare, compare, compare! Fees, rates, prepayment penalties, and terms. One hour of phone calls may save you thousands of dollars.

When signing documents, understand what and why you are signing. Don’t sign it if you don’t agree to it. Take your time. If someone tries to rush you through signing documents tell that person to slow down or “take a hike.” Plan on taking at least an hour to wade through a mortgage loan closing.

If consolidating, expect delays, and keep all other obligations current. It is much easier to get a refund of an overpayment than to suffer from increased charges resulting from delinquency.

Refinancing a mortgage loan can be great:

a. If the interest rate of the new loan is significantly less than the old one.

If the total of payments of the new loan is significantly lower than the old one.

Refinancing a mortgage loan can be a disaster:

If your equity gets eaten up by fees.
If you run up new debt because your consolidated payment is lower.
If you jeopardize your home by adding credit card debt to your home loan.
(Some lenders love to put your equity into their pockets thru fees, interest, and prepayment penalties).

Don’t fall for scams. Popular scams include: Lotteries you’ve never entered. Phony cashier’s checks to pay you. Tricks to get your account numbers or SS# and using your identity. Investment scams, especially pernicious when they involve you mortgaging your home to invest. Letting someone else use your good credit rating to buy homes, etc.

Don’t sign false statements, even simple ones like stating you intend to live in a home you don’t intend to live in.