What Interest Rate Will You be Paying ?
Credit cards come with a variety of annual percentage rates. There is every possibility you may be paying a higher interest rate than you expected.
Let us have a look at the common credit cards offered with Premium Pricing, Standard Pricing and Sub-Standard Pricing. The Premium APR would be the lowest interest rate listed. Suppose we assume that the rate for Premium is 11.99%, this will only be offered to applicants who have excellent credit scores. Those applicants with lower credit scores will not be able to qualify for this rate and may not be able to qualify for the card at all, depending largely on their credit history as well as on the credit card issuer.
We also realize that the Standard is priced in between the Premium and the Sub-Standard Pricing. The average Standard APR is around 16% and this applies only to customers with a good or better than average credit score. Applicants who have an average to fair credit score may qualify for the Sub-Standard Pricing. If we use our card as an example, the Sub-Standard Pricing rate may lie somewhere around 20% to 22%.
The credit card issuer will not be able to determine the applicant’s pricing until the application process has been completed and the applicant’s credit history has been taken into consideration. The following are a few tips that consumers can follow in order to avoid any unpleasant surprises:
Review Credit Card Terms:
Immediately upon receiving your credit card, you are expected to review it thoroughly. This way, you will understand the annual percentage rates, as well as any fees that you may be charged. If you find the rate is not what you were expecting, you will need to decide whether to accept the terms or reject the credit card.
Apply for Another Credit Card:
It is also advisable to apply for more than one credit card. This way you can pick the one with the lowest interest for those instances in which you will be carrying a balance and use the higher interest card only for things you will be paying off as soon as the bill arrives. However, be advised it is not a good practice to apply for more than one or two cards in any 90-day period as this will lower your credit score.
Make Sure Payments are Made in Plenty of Time:
You must always be prompt on making your monthly bill payments for your credit cards. If you are able to pay your account in full each month, you will find that in most cases the interest rate will not matter at all, as you will not pay interest on the balance so long as it is paid in full by the due date.
Be advised, however, that with some credit cards you will be charged interest from the date of purchase. Be sure to read the fine print so you will be aware of your credit card issuer’s policies. Balance transfers, of course, will always accrue interest from the date the balance transfer was initiated.
Paying 0% Interest is Even Better:
Applying for a credit card with a 0% introductory APR can be a great help in avoiding paying a lot of interest over the next several months. New card holders can enjoy an offer of 0% which can last anywhere from 6 months to as long as 18 to 24 months.