- You should avoid carrying a balance on your credit card whenever possible, but if you can’t pay your statement in full, the annual percentage rate (APR) matters. This determines how much interest you’ll pay on your balance.
- Credit card APRs are currently among the highest we’ve seen, but having a good credit score will help in getting offered a lower interest rate, and some cards offer 0% introductory rates.
- Cards offering introductory APR offers include the Blue Cash Preferred® Card from American Express and the Chase Freedom.
- Read more personal finance coverage.
According to NerdWallet, 47% of Americans carry a credit card balance month to month and pay interest on it. Obviously, paying off your card monthly is the preferred method, but if you’re going to purchase something with a card and carry a balance, your interest rate matters.
Say you paid $48 per month on a $1,000 credit card debt for two years at 15% APR. You’d pay $163 in interest charges. But take that same card and pay 25.99% APR, and it now costs $53 per month and $292 in interest.
What’s up with high credit card interest rates?
There was a time, just a few short years ago, that having excellent credit meant your credit card interest rate was low. Some people even selected cards based not only on miles, rewards, and cash back, but also on the very interest rate a card charged annually.
My, how things have changed. Good credit still rocks, of course, but today, interest rates on credit cards are some of the highest they’ve been in the past quarter-century. The interest rate on your credit card, called the APR (annual percentage rate), varies by card issuer, and the better your credit score, the lower the interest rate you’re likely to receive. Well, within those historically high rates, of course.
In 2009, Congress passed the Credit Card Accountability Responsibility and Disclosure (CARD) Act, which in essence restricted card issuers from changing the terms, including the interest rate, on your card after you opened it. Hard to believe that was once allowed.
Now that it’s harder for card issuers to raise rates in response to economic downturns, they’ve raised the rates on new accounts across the board…Read more>>