Making Your APR Work for You
There is no doubt that one of the most complicated and frustrating aspects of having a credit card is the annual percentage rate (APR). Some people don’t quite understand that the APR is simply the calculation of the interest on your credit card at a yearly rate. Once you know that, it makes things a little easier to understand. However, don’t be fooled. It is so easy to get in over your head! Interest rates can add up quickly, so spending wisely is always advised.
Interest Rates
Depending on your credit score, your interest rate can range anywhere from 11.99% to just above 23%. There is a big difference there, and the higher the interest, the more it’s going to cost you. Interest does add up, so spending frivolously can easily wind up costing you way more in the long run. In a nutshell, you don’t want to still be paying for something you bought a year from now because of interest rates.
Some credit cards can be so alluring, offering an introductory APR 0%. However, this rate will change within 6-12 months, so if you are unprepared, the hike in your credit card bill might catch you of guard. Interest rates can be either fixed or flexible. If you’re on a budget or don’t particularly care for surprises in your credit card bill, it might be wise for you to choose a card with a fixed-rate APR. However, whether your interest rate is fixed or flexible, you still need to be in the know about what you are being charged. Check the terms and conditions on your card. You might have an interest rate that is set on standard purchases, however, if you get a cash advance or use another feature of your card, the interest rate is most likely to vary per feature.
How to Make Your APR Work to Benefit You
Having a credit card can be very beneficial, and in an ideal world, we would be able to find the perfect card; one that let’s us set our own limits, choose our own APR, etc. However, we live in the real world, knowing this is not likely to happen.
While it would be nice to have a low APR, few of us will get a rate that is truly minimal. Even the slightest blemish on your credit report can affect your interest rate when getting approved for a credit card. Still, even if you can’t have the perfect APR, you can still make it work for you.
Key Factors
One of the most important keys with credit card interest can not be emphasized enough. Spending. Watch your spending closely. That interest can add up quickly and you’re the one who is going to have to pay the bill.
Another important factor is how much you pay on your bill every month. If you can, it is always best to pay off the balance with each billing cycle. Unfortunately, this won’t always be possible for everyone. Still, don’t just pay the minimum balance. Sure, it is an option, and an enticing one at that, especially when your cash is tight. Nevertheless, if you only pay the minimum balance every month, you’re really getting nowhere, and the bill will just keep adding up. The more you can pay on it every month, the less interest you will pay in the long run. So, pay the maximum you can afford, as opposed to the minimum balance due. You’ll thank yourself later on.
If you are forced to only pay the minimum once in a while, curb that spending until you are back on track. If you pay the minimum, but keep spending as usual, your debt is only going to increase.
If you follow these guidelines and pay close attention to your credit card use, you’ll see that credit card Credit card APR does not have to be intimidating, and your debt can be minimized by making your APR work to befit you.
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