We’re all familiar with credit cards and at one point or another the odds are that we’ve all had, or will have, at least one. Unfortunately, if we aren’t careful and don’t do our research then we could end up getting ourselves into trouble with those cards. Believe it or not, over spending on a credit card isn’t the only way to complicate our finances or our credit scores. Interest rates play a big role. Understanding the interest before signing up for a credit card could save you a lot of hassle down the road. Below are a few important things you should know before signing up a credit card.

What is Interest?

Generally expressed as an annual percentage rate, interest is the fee that the consumer pays in order to be able to borrow money from a credit card company. This fee is charged in order for a person to spend money today that they don’t necessarily have sitting in their bank account. The reverse of that would be if you were the one loaning out money that someone else didn’t have on hand, the interest you’d accumulate would be your payment for allowing the person to borrow the money from you.

What is an Interest Rate?

An Annual Percentage Rate, or APR, is a standard interest rate that all credit card purchases are subject to. It’s important that you’re aware that this rate isn’t the same across the board. This number actually varies depending on the card chosen and the credit score of the person that’s getting the card. The APR is expressed in terms of a year, however the companies actually use it to calculate monthly charges. This means that even though your Annual Percentage Rate reads in annual terms, the measurement can actually be used for periods of time shorter or longer than a year.

When is the Best Time to Pay the Interest?

This one’s important because it lets you in on a big secret about credit card interest, the companies generally grant you a grace period (usually a minimum of 21 days) between the date you make the purchase and the date your payment is due. If you pay off the entire card balance in full and by the due date, then typically these charges are waived by the credit card company. However, if the cardholder fails to pay the balance or pay by the due date then the company will add the interest incurred and apply it to the balance of the next statement.

Although credit card interest may seem pretty basic, it can hurt you if you aren’t aware of the way it works. Just because a credit card company offers you a high opening balance doesn’t mean that that is the card you should go with. The interest rate that they are wanting to charge may be much higher than another company that’ll offer the same, or even a slightly lower, balance. Knowing what you’re getting into before signing up can save you a lot of frustration in the long run.

If you find yourself struggling with debt or would like to find out about becoming debt free, call DebtHelper.com at 800-920-2262, or visit @ www.debthelper.com.