Understanding Credit Cards and Interest
We’re all familiar with credit cards. Most of us have had, or will have, at least one. But if we aren’t careful, credit cards can cause financial trouble. Overspending isn’t the only risk—interest rates can also affect your finances and credit score. Understanding interest before applying for a card can save you future headaches.
What is Interest?
Interest is the fee you pay to borrow money from a credit card company. It allows you to spend money today, even if you don’t have it in your account. Similarly, if you lend money to someone else, the interest you earn is your payment for lending it.
What is an Interest Rate?
A credit card’s Annual Percentage Rate (APR) is the standard interest rate applied to purchases. This rate differs by card and depends on your credit score. Although the APR is expressed yearly, companies often calculate it monthly.
When Should You Pay the Interest?
Credit cards often offer a grace period—usually at least 21 days—from the purchase date to the payment due date. If you pay the full balance by the due date, the credit card company typically waives the interest. If you miss the deadline or pay only part of the balance, the company adds the interest to your next statement.
Choose the Right Card
A high credit limit doesn’t always mean a good card. Some cards may charge higher interest than others for similar limits. Comparing interest rates and terms before signing up helps you avoid unnecessary frustration.
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.
