Understanding Credit Card Interest Rates
Many Americans world wide use credit cards. This is no secret. The unfortunate reality of the situation however is that most consumers don’t understand the rates that they are being charged on their charge cards. As a matter of fact, some studies show that about 60% of people who use credit cards have absolutely no idea what APRs they pay. This is a huge dilemma especially for many Americans who wish to get out of debt. With that said, I have compiled a list of the different types of annual percentage rates that consumers will come across with regards to charge card accounts.
#1. The Standard Interest Rate:
The standard annual percentage rate on a credit card is also known as the purchase annual percentage rate. This is the rate of interest that consumers will be charged for balances accumulated through standard purchases such as grocery store, gas station and restaurant purchases. The standard APR is usually the APR that will be charged to the majority of a credit card account balance simply because, most charge card balances are accumulated by way of standard purchases.
#2. The Promotional Interest Rate:
Another type of interest that is often charged on charge card accounts is called promotional interest. Promotional rates came as a result of amazing amount of competition in the credit card account industry. Because of this competition, lenders had to come up with ways to attract new people to their charge card account products. To do so, many lenders decided to offer a promotional interest rate which is simply a low rate that lasts for a short period of time from the date the consumer opens the charge card. Once the promotional rate expires, all balances will be charged the interest rate associated with their means of accumulation
#3. The Cash Advance Interest Rate:
The next type of charge card account rate that we will talk about is called the cash advance annual percentage rate. The cash advance interest rate will be one of the higher annual percentage rates on most credit cards. The cash advance rate however, is only charged to cash transactions such as ATM withdraws and cash back at grocery stores. Because cash advance interest rates tend to be very high, I generally advise consumers not to use credit cards for cash transactions.
#4. The Default Interest Rate:
The final type of charge card account interest rate that we will be talking about today is called the default rate. This is the rate that nobody wants to pay. Default APRs are usually the highest interest rates found associated with a charge card and for good reason. These APRs are only charged to people who have defaulted on their credit card accounts. Defaults include late payments, spending more than the credit limit, paying less than the minimum payment, ect… It is best that Americans keep their charge cards in good standings to avoid default interest rates.
This article was written by Joshua Rodriguez and is brought to you by:
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Author: LeeRodriguez
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