Credit card apr
America is awash with credit cards. There are major card companies like VISA, Master card, Amex and Discover who in turn have branded cards . This piece of plastic has now become the greatest financial innovation of all time. However in the maze of credit cards its worth pondering over a few points before applying for credit card which can be a major financial decision. It cannot be trifled with. With America for that matter the world having taken to cashless transactions the importance of selecting a credit card has greatly increased. What is important is to select a card with a low APR . APR as we know stands for the annual percentage rate . What does this mean ?This is the rate of interest that the credit card companies charge to a credit card holder on his outstanding or carry forward amount . The APR is worked out monthly. The significance of the APR can be understood as it relates to the interest charged on the amount due to the credit card company.
We must understand that when one uses a credit card he withdraws money from his card account. In practical terms the lender allows you to borrow money against a preset credit limit . This credit limit is a variable factor and depends on a number of factors like income, expenditure, credit rating etc . To allow you to use this credit which is really unsecured credit the card issuing company charges you interest . Due to the peculiar conditions of credit card advances that allow you to carry forward your debt the rate of interest is usually much higher than secured credit. The interest is also calculated monthly on the outstanding balance . The interest charged monthly when compounded on a yearly basis is called the Annual percentage rate or popularly APR .Thus a high APR will have a significant rise in interest charges while correspondingly lower will help the card owner- by way of a lesser interest being generated. Thus the aim of a credit card holder will be take a card which has a lower APR against a card with a higher Aretha credit card companies to help the user and more important to generate greater revenues for themselves, normally allow a card holder to pay only 2% of the outstanding amount .
The effect of the APR can be understood from a simple example. This will show that the interest charged by credit card companies coupled with the low minimum payment every month can have a very debilitating effect on ones finances . Thus a minimum payment of 2% of the outstanding on your card every month on an amount of $ 1000 will linger on for 22 years . That is if you only pay $20 per month or lower as the balance reduces . This is also only if you make no further purchases on your credit card . This in itself is a difficult proposition.
This problem of prolonged credit card debt has been attended too and with a little prodding from the government the minimum amount due is raised to 4% of the outstanding by some card issuers.
To get around this problem of high APR is to subscribe to credit cards which have a comparative low APR. Presently the APR hovers above 18% along with membership and other charges. However to improve their client base in the world of cut throat competition the card companies have come out with credit cards that have a Low interest or 0 percent introductory rates . These cards actually have been marketed only for about the last 15 years or so . In that respect they are recent phenomena. To attract new members and build up the credit base almost all card companies offer this low Apr. But they come with a rider as this offer is generally available only on a balance of transfer and only for a limited period say 3 or 6 months only. Some card issuers may offer this as an extended facility for 12 months even. Credit card companies high light the low APR introductory offers but rarely say anything about what happens after expiry of this low introductory period say after six or 12 months.
Credit card companies justify the high rate of Interest (APR) as firstly it is unsecured credit and secondly in case of death of the credit card holder the outstanding amount usually just lapses in case there is no residual estate or asset of the card owner . Thus in some cases credit card companies have to write off thousands of dollars as credit card debt.
The rate at that time is a much higher rate and is more often than not a variable rate based on an index such as the prime lending rate (the rate at which the top banks in the United States can borrow money from the Federal Reserve). This rate also varies depending on the overall credit rating and financial standing of the individual. This is because banks offer the lower rates only to people with good credit .
A few of the more important Credit Cards that subscribe to a low APR are the Discover cards more card. This has a low APR of 0% for the first 6 months on purchases and 12 months on balance transfer . In addition the regular APR is only 10.9% with no annual fee. Another APR Credit Card low is the Citi Platinum select card . This has an introductory APR period of 12 months and regular APR of 9 .24%.No annual fees is charges but your credit rating must be good to avail this card .
Another important APR Credit Card Low is the Chase Platinum card. This card gives a 0% APR for 15 months and charges no fees . The blue from American Express and capital one no hassle miles card are other options . After the introductory period the APR charges is 13 .9% in the case of Capital card and APR of 11, 9% by the blue American express cards .
Study all the offers on the net in addition to the ones given above and then form your plan as to which card to select and then select the Credit Card that you feel is the best. You can be a winner with a judicious selection.But there is no escape from a high APR in case you have taken a credit card .But do remember it is unsecured credit and for this benefit you must fork out the required APR.
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