Best credit card interest rate
Credit Cards come with different interest rates and different schemes, and in order to get the best rate it is important to know a little bit more about the basics.
Credit Card companies often come out with offers to attract more customers. They might offer a great interest rate or a higher limit or waive annual fees, or resort to any number of methods to persuade people to sign up. But it?s important to always read the fine print and ask questions before signing on for a credit card. Know what you?re getting into before putting your initials on the dotted line.
Compare offers check interest rates across banks to find the best offer. You may be able to take advantage of a new offer from your existing credit card company, or you may be able to switch credit cards and get much better terms with a new company. Before you choose a credit card with the best interest rate it is advisable that one gets to know all the details which pertain to the credit card. Moreover, as these are the factors which lead to the determination of the interest rates, these may be more informative.
Average daily balance
Credit card companies keep track of your balance at the end of each day. They track this for a month and then find the average of that (by dividing it by the number of days in the billing cycle, say 30). This average daily balance amount is then multiplied by the interest rate for a month to give your amount due.
Annual percentage interest rate (APR)
This is the yearly rate of interest after including all fees and costs associated with having the credit card. Lenders are required by law to disclose the APR. The main aim of the APRis to allow borrowers to compare loans so that they know which accounts are costlier. This way a card company which officially quotes a low interest rate and hikes up other charges, would have a similar APR to a company which has a high interest rate but does not charge for things like annual fees.
Balance transfer
This is a facility provided by issuers, to transfer your existing dues from another credit card. Issuers sometimes offer very low rates to encourage balance transfers coming in and charge balance-transfer fees to discourage them from going out.
Cash-advance fee
This is what issuers will charge you if you withdraw money directly on your card from an ATM, rather than swiping it at a merchant outlet. This fee can be stated in terms of a flatper-transaction fee or a percentage of the amount of the cash advance. In order to discourage cash advances, generally a minimum flat fee is charged regardless of the amount withdrawn, and then this is compared to the interest on that advance to see which should be charged to you. Remember that if the amount is deducted from your advance itself, then your effective interest rate is that much higher. The cost of a cash advance is also higher because there generally is no grace period. Interest accrues from the moment the money is withdrawn.
Cardholder agreement
This is a written statement that gives the terms and conditions of a credit card account. It is a legal agreement. It must include the Annual Percentage Rate, the monthly minimum payment formula, annual fee if applicable, and the cardholder\'s rights in billing disputes. Changes in the cardholder agreement may be made, with written advance notice, at any time by the issuer.
Finance charge
This is the charge for using a credit card- it includes interest charges and other fees.
Grace period
Grace period is the interest-free time a lender allows between the transaction date and the billing date. This facility is only available if there is no balance outstanding at the beginning of the billing cycle, so people who pay only the minimum amount due on their cards will not be able to avail a grace period. If there is no grace period, finance charges will accrue the moment a purchase is made with the credit card.
Minimum payment
This is the minimum amount a cardholder has to pay to keep the account from going into default. Some card issuers will set a high minimum if they are uncertain of the cardholder\'stability to pay. The standard minimum amount due is generally two per-cent of the outstanding, and many issuers usually have a minimum flat amount which will apply if the calculated minimum amount due is too low.
Periodic interest rate
This is the interest rate described in relation to a specific amount of time. The monthly periodic rate, for example, is the cost of credit per month; the daily periodic rate is the cost of credit per day.
Pre-approved:
This is just marketing jargon. A credit card offer with "pre-approved" only means that a potential customer has passed a preliminary credit-information screening. A credit card company can still reject the customers it invited with"pre-approved" terms, if it doesn?t\'t like the applicant\'s credit rating.
Secured card
This is a kind of credit card that is secured against the cardholder?s savings deposit to ensure payment of the outstanding balance if the cardholder defaults on payments. Obviously, this is only available if the cardholder has a savings account with the issuer. It is used by people new to credit, or people trying to rebuild their poor credit ratings.
Variable interest rate
Percentage that a borrower pays for the use of money, and which moves up or down periodically based on changes in other interest rates.
Choose fixed over variable interest rate:
Cards may come with either a fixed rate of interest or a variable rate of interest. Generally speaking, a low, fixed-rate credit card is better than a low, variable-rate credit card. Card companies can raise their fixed-rate cards when interest rates go higher, but change is not automatic and they need to give you 15 days\' notice. With a variable-rate card your rate can move regularly and without any prior notification.
Always be careful with mail received from your credit card company.
It may not all be useless promotional/advertising junk. It may be important. The same advice applies not only when you\'re searching for a card, but after you get one - check all the? junk" mail in your statement envelope before you throw it away.
Plan your credit card usage and payments:
Be sure you are aware of your payment profile, because the way you plan to pay your bills is important when it comes to choosing a card.
Understand all the terms:
Make sure you confirm with a company that they are offering what you think they are offering. It\'s very easy to misunderstand some of the information there in the small print. Go over it with them, and then ask if they can do better - their best offer of interest rate may not be the first deal they offer you.
Check how the interest is calculated on your account. Find out all the charges you will have to pay and when they would apply. For eg. An annual fee may reduce the monthly interest rate on your card, so if you plan to keep an outstanding this would be useful.
Penalty fees or other additional charges (e.g., annual fee, late fee) also need to be figured into the value of any deal. For example: If you know your credit history and you know that, despite your best efforts you\'re going to be late a few times with the payment, use a calculator to see if a card with a slightly higher interest rate but lower late fee might be a better deal.
Most credit cards nowadays offer many perks, such as:
Cash rebates on certain purchases (or in some cases all purchases) rewards points and gifts discounts on a lot of good and services. insurance on such things as travel or auto rentals. Frequent-flier miles.
Find out all of this before choosing the best card for you. Especially be careful while choosing the card with the lower interest rate, because there may be other hidden cost and charges which you may not know. At the same time, do not reject a credit card because it charges a higher interest rate, as it may have some other good offers in it. So beware before choosing to get a credit card.
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