Do you have a credit card? Chances are, if you are over the age of 18 and currently reside in the United States, you do! As a matter of fact, the average consumer in the United States not only has a credit card but has hundreds or even thousands of dollars in credit card balances. Surprising? Well, it normally doesn’t come as much of a surprise. What is very surprising however is the response that I get from Americans when I tell them that their charge card accounts have more than one interest rate! Although, most people use charge cards, the vast majority of them don’t understand the interest rates they are paying and how the interest rates are applied to their balances! Now, that is quite shocking! With that said, for those people who don’t know much about charge card account interest rates, here is a list of interest rates that you might be being charged and how they work:

Standard interest rates: The first interest rate that I’m going to talk about is one that people probably already know about. The standard interest rate on a charge card account is the only one that many people think that they pay. However, this interest rate only applies to standard purchases. This includes purchases such as groceries, gas, entertainment and anything else that Americans would purchase on a regular basis. However, this interest rate does not apply to all balances.

Cash advance interest rates: The next interest rate is one that quite a few consumers don’t know about until it is too late. Thinking that the standard interest rate applies to their entire balance, several Americans decide to use their credit card for ATM transactions, wire money transfers and cash back at grocery stores. Unfortunately however, these types of purchases require that Americans pay a higher cash advance interest rate in most cases! This is why it is a best practice for people to not use charge cards for cash transactions.

Balance transfer interest rates: Because of the overwhelming demand for charge cards amongst Americans, quite a few banks started offering these products. This lead to a rise in competition. Looking for a way to catch the attention of people, banks created balance transfer credit card accounts that would allow people to use them to pay off credit card debts held by other lenders. These transactions are normally charged the balance transfer interest rate which is usually either the same or lower than the standard interest rate for the credit card.

Promotional interest rates: Due to the overwhelming competition in the credit card account industry, along with balance transfer charge cards came promotional interest rates. Promotional interest rates are very low, even 0% interest rates that last for the duration of the promotional period. Promotional periods always start the date the credit card account is activated however, the term of the promotional period can range from 6 to 18 months in most cases. Also, the promotional interest rate may apply to all or simply a portion of people balances depending on the promotional offer. It is important to read the terms and conditions when consumers are interested in a promotional charge card.

Default interest rates: Finally, the default interest rate is one that people never want to pay. It’s by far the highest interest rate on any charge card account account and, for good reason! This is the interest rate that will apply to all balances on a charge card account should Americans default on the account. Defaults include late payments, spending more than the credit limit, ect…

I hope you enjoyed my explanation of charge card account interest rates! Please come back and read more of my articles soon!

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