Credit cards are not created equal. Each one seems to have something that its competitors do not. Finding the best credit card rates can seem overwhelming at times. But there are ways that you can find great credit card rates without all of the confusion that can surround the credit world.
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Interest rates are attached to everything as far as credit is concerned. When an issuer extends a line of credit, they expect not only repayment but also payment of the interest rate. This is how they make money. Finding a great rate for a credit card is not always easy, but it does not have to be that difficult either.
Research the Interest Rate before Applying
Issuers base their rates on the current Federal Reserve Rate. Do a little research and find out what the current rate is so you are ready to negotiate when you apply. You can also search that issuer’s website to see what that particular card is rated at.
The Lowest Rate does not mean the Best Credit Card
Before you apply for a credit card, do your homework. A little research can go a long way and save you a lot of time, hassle, and unexpected charges on your monthly statement. It might be a pain, but read up on the contractual agreement.
In February 2010, the Card Accountability, Responsibility, and Disclosure Act went into effect. This Act has put some new constraints on credit card issuers as to how they are allowed to penalize their customers. In order to recoup some of those financial losses, the card issuers have recycled those charges to other parts of the credit card agreement such as annual fees, over-the-limit charges, and high annual percentage rates (APR).
Keep in mind that just because a credit card has a low introductory rate or offers zero percent interest for the first few months does not mean that it is the wisest choice. Once the honeymoon phase is over, the APR could skyrocket.
Some credit cards offer reward points. In order to accumulate these points, you have to use the card. The catch is this: the interest rate is exceedingly high. So much so that what you pay in interest far outweighs the value of the rewards points.
APRs Can Fluctuate
One little credit card can have a myriad of APRs. Depending on the type of transaction, the APR differs. There is an APR that is used as the introductory rate when you are first approved for the credit card that expires after that introductory period. Balance transfers have a different APR applied to them as do cash advances.
Credit scores play a huge role in determining your APR. Consumers are entitled by law to receive a free credit report once a year from the three main reporting companies. Go to AnnualCreditReport.com to get a free copy of your credit report. The rule of thumb is the lower your credit score, the higher your APR will be.
Request an Interest Rate Reduction
Rate reductions are not common, but not impossible either. Call your issuer and request a lower APR. You might want to mention that you found a better deal elsewhere in order to motivate them in retaining you as a customer. Worst-case scenario – they say no. But it does not hurt to inquire.
If you are suffering from a layoff or other financial hardship, inform your issuer of your situation. They may be more inclined to reduce your rate, even for a short time period, in order to help you continue making your payments rather than go through collections for non-payment.
Avoid Paying APRs Completely
The Federal Trade Commission (FTC), recommends the simplest, but not always the easiest solution, which is to pay off the entire balance of the credit card at the end of each month.
You cannot be charged interest on a balance that does not exist.
Interest also applies to the new balance that is calculated with late payment fees. If a payment is late, there is a fee added to the total balance. That new balance will begin to accrue interest. Try to avoid making late payments if you can. These are also reported to the credit bureaus, which could hurt your credit score, thus increasing your interest rate.
If you are searching for a credit card with an affordable rate, we can help you find the best one to suit your needs with the FREE credit card finder!
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