Low Interest Credit Cards - Are They Really Low Interest?
Is your low interest credit card really low interest? Following is a list of the four most common methods of calculation regarding how finance charges are figured: Calculation Methods
There are annual fees and late fees as well as other penalty fees to be considered based upon your method of bill paying and credit history.
Awareness of your own payment style is important because if you know that you are occasionally late with your credit card payments - in spite of your best efforts to be timely - perhaps a card with a slightly higher interest rate but lower late fee might be a better deal for you.
Of course, the lower your interest rate, the more you will save on the finance charges that the company applies to your outstanding balance.
Consequently, you should consider credit cards that offer you a low introductory rate - at least for the first six months.
Read the fine print so you are aware of the change in interest rate when the introductory rate expires.
You should also be aware if the company will make any changes other than the rate of interest.
If you currently have a card with a bank that charges high interest rates, you can always transfer your balance to another bank with a lower rate.
Some credit card companies' offer perks along with your card.
Some of these rewards that are commonly included are:
Some people consider this information sent with their credit cards to be junk mail, but be aware it is important financial information that may cause you penalties and affect your interest rate later on.
- Average daily balance - The credit card company averages your daily balance.
For example, if you charged a purchase of $200 on the 1st day of July and $300 on the 17th, your average daily balance would be $250.
That number multiplied by approximately one-twelfth of your annual percentage rate (APR) equals your monthly finance charge.
The company may calculate your interest on either a daily or monthly basis. - Daily balance -The credit card company takes the actual balance you carry each day of your billing cycle and multiplies it by approximately 1/365th of your APR and then adds it together.
- Two Cycle Balance - This method of calculation is similar to an average daily balance except the daily average is based on your last two billing cycles, not just one.
If you do not pay off your credit card in full one month, you will be hit with retroactive interest on your next bill. - Previous Balance - The beginning and ending balance of your statement are shown.
The finance charge is based on the outstanding balance when the billing cycle begins.
There are annual fees and late fees as well as other penalty fees to be considered based upon your method of bill paying and credit history.
Awareness of your own payment style is important because if you know that you are occasionally late with your credit card payments - in spite of your best efforts to be timely - perhaps a card with a slightly higher interest rate but lower late fee might be a better deal for you.
Of course, the lower your interest rate, the more you will save on the finance charges that the company applies to your outstanding balance.
Consequently, you should consider credit cards that offer you a low introductory rate - at least for the first six months.
Read the fine print so you are aware of the change in interest rate when the introductory rate expires.
You should also be aware if the company will make any changes other than the rate of interest.
If you currently have a card with a bank that charges high interest rates, you can always transfer your balance to another bank with a lower rate.
Some credit card companies' offer perks along with your card.
Some of these rewards that are commonly included are:
- Discounts on various goods and services.
- Frequent flier miles
- Insurance on auto rentals or on travel.
- Cash rebates on some purchases made with your card.
- Insurance on purchases made with your card.
Some people consider this information sent with their credit cards to be junk mail, but be aware it is important financial information that may cause you penalties and affect your interest rate later on.
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