When shopping for a credit card, it is important to understand
the annual percentage rate (APR) to find the best deal for your
situation. If you pay off your bill every month, a no fee and
moderate APR plan may be best. However, if you take out cash
advances, you will want a low APR on that feature.
Various APRs
Each credit card has several different APRs. At the minimum they
will have a rate for purchases, cash advances, and transfers.
Typically, cash advances will carry a higher rate than for
purchases or transfers. Transfers usually carry low rates.
Sometimes you can even find an APR of 0% for an introductory
period.
To entice you to open an account, credit card companies offer
introductory and delayed APRs. An introductory rate lasts for a
certain period, usually six months to a year. Delayed APRs
charge no interest until a certain month.
Some cards also offer tiered rates, which keeps rates low for
those that carry a small balance. For example, a card might
offer 15% on balances between $1 - $1000 and 18% on balances
over $1000.
Credit card companies also have penalty APRs. These apply when a
payment is late, as outlined by the card's terms.
Fixed Versus Variable APRs
A fixed rate APR doesn't change. Usually these types of cards
have an annual fee with them. But they usually offer lower rates
with some security, making them attractive to those who carry
large balances. It is important to remember that even fixed
rates can change, but the credit card company has to give you
notice.
A variable rate APR flexes with the index they are tied to,
typically the prime or T-bill rate. Variable rate APRs are not
the same as an introductory or delayed APR.
Picking The Right Card
Research all the APRs when you are looking for a good credit
card. Know your credit habits, and pick the card with the rates
that will give you the best deal.
You can even open multiple accounts, using them for different
credit purposes. For example, you can use one card for cash
advances but another for purchases.
About the author:
See my recommended
Credit
Card Lenders online. Carrie Reeder is the owner of
ABC Loan Guide, an
informational website about various types of loans.
