Line of credit interest rate
Credit card is nothing but a one month loan you take from that particular bank whenever you use it. So if you're able to earn more than the total amount which includes interest by repayment time the rate of interest really does not matter. But the plastic money we hold is most of the times is just for convenience. Here are some of the details about interest calculation process.
All kinds of interest rates
APR refers to annual percentage rate you are charged. Its same as interest rate.
The percentage rate is set by bank as a benchmark, which hovers around 6% to 10%.
1) A fixed APR refers to interest that will not change until the issuer or the banker decides to change it.
2) A variable rate of interest depends upon a certain index and changes according to the fluctuation of the index. Some card issue prime for life offer which means the rate will not increase above the prime level.
3) A teaser rate is a very special offer the lender gives at that particular time. With most of the tease available there is a time limit attached, and as the time limit expires the balance is either charged at fixed apr, or variable interest rate.
A penalty rate is charged if the lender is mislead and these are some of the reasons for penalty.
1) Late payment: Even one late payment would write-off your teaser rate and next rate of interest will be according to the lender choice.
2) Your bill paying habits: Even if you do not take advantage your teaser rate properly extra rate of 32% will be charged.
3) Default of a loan: If the lender sees that you default a loan from that particular bank then he would rephrase the interest rate so that he is not in any loss.
Once you've figured out what your interest would be, try to make most of it by being a smart shopper. See how this rate actually works in practice; keep a note on the method he has used, and see if any grace period is given if all the bills are been paid promptly. Continue with the same card only if it goes profitable to you. The day it starts looting you its just a plastic card and you can start searching for another one.
Keep these finer points in mind as you use your card.
1) If the credit card has variable interest then the rate must change on a particular day. Else when the rates are getting low the rate of interest would be changing slow and when the rate of interest are going high they would change comparatively faster.
2) Some issuer make initial rate variable and would not exceed the prime rate. But you are not in a advantage situation if the rates are falling down.
So next time you pay your credit card bill or buy a new one all together make sure you read each and every line of the document and then take a decision.So all you buyers be wise and happy shopping.
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