Your interest rate is calculated on a daily basis once you are quoted an APR or annual percentage rate. To find out your daily rate, divide the APR by 365 days. Then, multiply that amount by the amount owed, then the amount is added to your balance in the credit card the following day.
You can do the calculation using your interest calculator. With this calculator, you will know how long it will take before you clear your balance in your credit card with your minimum payment. It also tells you how much savings you can make if you clear your balance soon.
Types of APRs
A number of the typical APRs charged by credit card issuers are listed here.
-APR for purchases. This is the most common APR. This applies to cardholders with a balance on their cards. For example, the Amex every day ® Credit Card from American Express†, offer a 0% intro offer for a given time, for a daily basis, it lasts for 15 months. Then, the balance is charged at the go-to rate of 15.24% – 26.24% variable, as the standard rate for the card.
-APR for balance transfers. Balance transfer cards offer a 0% intro annual percentage rate (APR) for a period of time, then revert to the go-to rate.
-Cash advance APR. This rate usually starts immediately after you take out the cash.
-Penalty APR. Some cards don’t have this type of APR, while others do. It can be high and some issuers constantly access your payment history to decide if this rate continues.
Save money with a low-interest credit card:
A high-interest rate is one of the reasons for signing up for a card debt. Assuming you owe $3,000 and you are paying a rate of 16.5% APR, then it would take you 124 months to clear the balance. In the end, you will pay $2,122 as interest.
Surprisingly, card debt is approaching $1 trillion, reaching $844 billion in Q3 as of 2018, according to the New York Fed, it is $15 billion higher compared to Q3 2017. Also, seriously delinquent accounts reached 4.9% that quarter, up from 4.8% in Q3 2017.
To avoid carrying a balance on your card, endeavor to pay in full monthly and avoid carrying charges on your card. Rather, set outside some fund to make that purchase.
Already stuck in a debt? don’t panic. All you need to do is increase your payment so that your charges will reduce. Another way is to transfer an existing balance to a balance transfer card or a low-interest card. This way, you can clear your balance faster and at the same time, save some dollars.
How to get a lower interest rate:
A number of factors are considered before a rate is decided. Some of them are- your payment history and credit score. Meanwhile, it is not out of place to request for a rate decrease. According to 2018 creditCard.com poll, 56% of customer who requested a decrease was considered.
Common Scenarios peculiar with low APR Credit Card:
You might not have enjoyed the benefits that come from credit cards. Although you might already have much of them. Here, you will be taken through a few scenarios and how they can work for you.
-Your credit limit is too low:
Clear the balance using two cards. Then, pay off that card first, while budgeting to pay off the low-interest card before any special offer ends.
-Your credit score is too low:
If your credit is too low to get a 0% or low-interest card, which typically requires good or excellent credit, use your spouse card. Provided it’s within an acceptable range, let him/her make you authorized user.
-You are also looking for rewards:
You may have a huge bill to settle but still want a reward. Here’s what you do: Some rewards cards have great introductory offers on balance transfers and purchases. The America Cash Rewards and the Capital One SavorOne are good examples. With your spouse, pick one card each . You can go for the American Cash Rewards while your spouse picks the Capital One SavorOne. Make each other authorized users. Then arrange your monthly purchases based on the credit card each of you has. Be sure to coordinate your expenses so that it doesn’t go over the limit . You’ll have a balance after the offer ends.
Decide you’re monthly maximum and continue to pay the same amount even after the offer. By sticking to this, you will reduce your credit card interest rate.
-You plan to close the credit card.
Once you have cleared the balance on your credit card, you might consider closing the card.This is easier when you have enough card but need that new card to get over a situation. In this situation, you can consider the city cards which offer a prolonged 0% without rewards. Now, you are spending nothing . Above all, you are regretting nothing when the account is finally closed.