January 31, 2011
January 30, 2011
Comparing Credit Card Interest Rates
Jerry Warner asked:
If you’ve been in the market for a new credit card but don’t want to pay more than you have to in interest rates, you might find yourself wondering exactly how you can sort through all of the promotional rates and other numbers that credit card companies throw at you to determine which card actually has the best rate. By taking the time to read carefully through the information provided to you by the credit card company either in promotional materials on or their website. However, you can find all of the information that you want with relative ease. It’s simply a matter of knowing where to look, and what you’re looking for.
Defining the Annual Percentage Rate
The key to knowing how much you’re paying in interest lies in understanding the annual percentage rate, or APR. The APR is the interest that is charged on a credit card’s balance each year, and is subject to change depending upon nationally-set interest rates and the cardholder’s credit rating. If you want to compare credit cards based upon the interest that they charge, then you should compare them based upon the APR of each card. Though the promotional advertising of many credit cards may only display the promotional rate that is being offered in a prominent position, the APR of the card is required to be disclosed along with additional information concerning billing structures, additional fees, and how these rates and fees are calculated and charged.
Where to Find the APR
In order to find the APR among all of the promotional information that generally accompanies credit card flyers, mailings, and websites, it’s important to know where to look. If you’re evaluating credit cards online, you should be able to find a link that will take you to a separate page that contains financial disclosure information and a chart that lists the APR along with other fees and charges that might accompany your card. Should you be looking at a mailing sent by the card company, there should be a separate page (or possibly the back of a page) that contains the same information and chart.
Concerning Promotional Rates
Don’t be fooled by the promotional rates that some cards offer, but don’t ignore the promotional rate either. Most promotional rates only last for a few months, generally either three or six, but that means that there are three or six months during which you’re only paying a very small interest rate. This can be especially useful if you’re transferring balances from other cards or using the new card to pay off older debts. It’s important to make sure that the rate which the card will revert to after the promotion is something that you are willing to pay, however, or you might end up with a much higher rate than you were looking for.
Making Your Comparisons
When comparing credit card interest rates, you should compare the APR of each card that you’re considering. Look for any processing or activation fees that may be charged, and avoid them if possible; if not, factor them into your considerations. You’re looking for the card that has the lowest APR and that has lower fees than the other cards or if possible that has no fees at all. Don’t ignore promotional rates, but don’t rely on them either… if you can find a card with promotional rates that also has a lower APR than some of your other options then great. If you can’t, don’t get stuck with a high interest rate just to start off lower.
Virginia
If you’ve been in the market for a new credit card but don’t want to pay more than you have to in interest rates, you might find yourself wondering exactly how you can sort through all of the promotional rates and other numbers that credit card companies throw at you to determine which card actually has the best rate. By taking the time to read carefully through the information provided to you by the credit card company either in promotional materials on or their website. However, you can find all of the information that you want with relative ease. It’s simply a matter of knowing where to look, and what you’re looking for.
Defining the Annual Percentage Rate
The key to knowing how much you’re paying in interest lies in understanding the annual percentage rate, or APR. The APR is the interest that is charged on a credit card’s balance each year, and is subject to change depending upon nationally-set interest rates and the cardholder’s credit rating. If you want to compare credit cards based upon the interest that they charge, then you should compare them based upon the APR of each card. Though the promotional advertising of many credit cards may only display the promotional rate that is being offered in a prominent position, the APR of the card is required to be disclosed along with additional information concerning billing structures, additional fees, and how these rates and fees are calculated and charged.
Where to Find the APR
In order to find the APR among all of the promotional information that generally accompanies credit card flyers, mailings, and websites, it’s important to know where to look. If you’re evaluating credit cards online, you should be able to find a link that will take you to a separate page that contains financial disclosure information and a chart that lists the APR along with other fees and charges that might accompany your card. Should you be looking at a mailing sent by the card company, there should be a separate page (or possibly the back of a page) that contains the same information and chart.
Concerning Promotional Rates
Don’t be fooled by the promotional rates that some cards offer, but don’t ignore the promotional rate either. Most promotional rates only last for a few months, generally either three or six, but that means that there are three or six months during which you’re only paying a very small interest rate. This can be especially useful if you’re transferring balances from other cards or using the new card to pay off older debts. It’s important to make sure that the rate which the card will revert to after the promotion is something that you are willing to pay, however, or you might end up with a much higher rate than you were looking for.
Making Your Comparisons
When comparing credit card interest rates, you should compare the APR of each card that you’re considering. Look for any processing or activation fees that may be charged, and avoid them if possible; if not, factor them into your considerations. You’re looking for the card that has the lowest APR and that has lower fees than the other cards or if possible that has no fees at all. Don’t ignore promotional rates, but don’t rely on them either… if you can find a card with promotional rates that also has a lower APR than some of your other options then great. If you can’t, don’t get stuck with a high interest rate just to start off lower.
Virginia
January 26, 2011
January 25, 2011
The Credit Card Interest Rate Scam
Clive Fleming asked:
Lately, some banks have been raising credit card interest rates on large segments of their customers and it can’t help but look suspicious. Their spokespeople claim that they periodically review accounts to make sure their credit risk hasn’t significantly changed. Then, or course, when they determine that the risk has changed on an individual account, they change the payback terms for that customer. Usually this means significantly raising their interest rates and/or minimum payment.
Now all of this is happening in the face of three significant events
1) The Fed has cut the Prime Rate
In the last several months, the Fed has cut the Prime Rate by over 2 percentage points. That’s the rate that many variable-rate credit cards are based on. All things being equal, that would mean that most credit cardholders would see a drop in their rates – even those cardholders who have very high rates due to their “poor credit risk.” But that’s not happening. What is happening is that more cardholders (good credit and bad) are seeing their rates go up.
2) The new CARD Bill has passed in Congress
Recently, Congress passed the CARD bill (the Credit Card Accountability, Responsibility, and Disclosure act of 2009) which, among other things, prevents credit card companies from raising your rates just because they can. When the bill’s provisions go into effect in 2010, credit card issuers will only be able to raise interest rates on existing balances if a promotional rate has expired, a variable rate is set to change, or if a minimum payment is more than 60 days late.
So in essence, from now until February, 2010 the banks have the ability to raise interest rates in just about any way they see fit. When the clock strikes midnight on January 31st, the party’s over. So they have every incentive then to raise as many rates as possible now.
3) Everyone is in trouble
Everywhere you look our economy’s in trouble. Like it or not, we’re all joined together at the hip on this one. What is bad for the merchant down the road is somehow going to ripple down to you and me at some point. It’s logical to work at this together, but that’s not the approach of the banks. They’re going after as much cash as they can because that’s how they roll.
So fasten your seat belt folks. The credit card flight is going to get pretty bumpy from now until next January. Watch your bills like a hawk. Get ready to make some phone calls and write some letters if need be. Make some noise with your elected officials. Give your local Credit Union a second look. Investigate prepaid debit cards. You’re going to have to fend for yourself, so take a deep breath and get ready!
Lisa
Lately, some banks have been raising credit card interest rates on large segments of their customers and it can’t help but look suspicious. Their spokespeople claim that they periodically review accounts to make sure their credit risk hasn’t significantly changed. Then, or course, when they determine that the risk has changed on an individual account, they change the payback terms for that customer. Usually this means significantly raising their interest rates and/or minimum payment.
Now all of this is happening in the face of three significant events
1) The Fed has cut the Prime Rate
In the last several months, the Fed has cut the Prime Rate by over 2 percentage points. That’s the rate that many variable-rate credit cards are based on. All things being equal, that would mean that most credit cardholders would see a drop in their rates – even those cardholders who have very high rates due to their “poor credit risk.” But that’s not happening. What is happening is that more cardholders (good credit and bad) are seeing their rates go up.
2) The new CARD Bill has passed in Congress
Recently, Congress passed the CARD bill (the Credit Card Accountability, Responsibility, and Disclosure act of 2009) which, among other things, prevents credit card companies from raising your rates just because they can. When the bill’s provisions go into effect in 2010, credit card issuers will only be able to raise interest rates on existing balances if a promotional rate has expired, a variable rate is set to change, or if a minimum payment is more than 60 days late.
So in essence, from now until February, 2010 the banks have the ability to raise interest rates in just about any way they see fit. When the clock strikes midnight on January 31st, the party’s over. So they have every incentive then to raise as many rates as possible now.
3) Everyone is in trouble
Everywhere you look our economy’s in trouble. Like it or not, we’re all joined together at the hip on this one. What is bad for the merchant down the road is somehow going to ripple down to you and me at some point. It’s logical to work at this together, but that’s not the approach of the banks. They’re going after as much cash as they can because that’s how they roll.
So fasten your seat belt folks. The credit card flight is going to get pretty bumpy from now until next January. Watch your bills like a hawk. Get ready to make some phone calls and write some letters if need be. Make some noise with your elected officials. Give your local Credit Union a second look. Investigate prepaid debit cards. You’re going to have to fend for yourself, so take a deep breath and get ready!
Lisa
January 24, 2011
January 21, 2011
New Credit Card Laws – Interest Rates
Ken Muller asked:
Credit card companies have a number of tricks and traps for the unwary card-user. Late fees and interest rate hikes are only the tip of the iceberg. Recently, however, the president signed new legislation in regards to credit cards, specifically billing fees and interest rate spikes. This means big changes for those who own and use them will be taking place throughout the coming year. So, in the interest of keeping informed, let’s take a look at the new credit card rules and what they can mean for you.
Forty-Five Days
First off, credit card companies will now have to give cardholders forty-five days notice before their interest rates are raised. In addition, card-users must also be notified of any other changes of terms, including rewards points programs. What this means is that the days of sudden surprise increases in interest fees are over. Credit companies can still raise their interest rates, but they must give roughly two months notice to those affected by such an increase first. This may not matter much if you’re good at keeping things paid down, but it will help immensely if an interest increase means you’ll need to change your monthly budget.
Twenty-One Days
Next, banks that supply the funds for your credit card must send out your monthly billing statement no later than twenty-one days before it’s due. Late bills are always a pain in the posterior region, and it’s a common trick for a credit card company to pull, sadly. A few late bills and-BOOM-you’re in debt thanks to punitive late fees. Now, however, banks are legally obligated to get your bill to you on time, every time. It makes a lot of difference, trust me.
Late Fees
Speaking of late fees, thanks to the new legislation, if you get your payment in by five PM on the due date, it’s in and you can incur no late payment penalties. No more early morning deadlines (another credit card company trick, and one that a lot of people have fallen for without realizing it) or late fees due to banking weekend or holiday hours. That means if your due date is on a Sunday, and your payment doesn’t go through until Monday, you won’t be penalized.
Highest Interest First
When paying different balances on the same card-cash advance and credit, for instance-the credit card company will now have to apply your payment to the balance with the highest interest, as opposed to whichever they fancy. And speaking of cash advances, banks will now require your express permission to allow you to go over your credit limit.
These are only the biggest changes to the way credit card services now work, thanks to the new legislation. All in all, the changes will make it harder for the credit card company to hinder you in paying off or paying down your accrued debt – your credit card costs should be less. However, this doesn’t mean that you’re in the free and clear. You’ll still need to pay on time, every month if you intend to clear your debts. But the new credit rules will make it somewhat easier from now on, which is a nice change of pace.
Janet
Credit card companies have a number of tricks and traps for the unwary card-user. Late fees and interest rate hikes are only the tip of the iceberg. Recently, however, the president signed new legislation in regards to credit cards, specifically billing fees and interest rate spikes. This means big changes for those who own and use them will be taking place throughout the coming year. So, in the interest of keeping informed, let’s take a look at the new credit card rules and what they can mean for you.
Forty-Five Days
First off, credit card companies will now have to give cardholders forty-five days notice before their interest rates are raised. In addition, card-users must also be notified of any other changes of terms, including rewards points programs. What this means is that the days of sudden surprise increases in interest fees are over. Credit companies can still raise their interest rates, but they must give roughly two months notice to those affected by such an increase first. This may not matter much if you’re good at keeping things paid down, but it will help immensely if an interest increase means you’ll need to change your monthly budget.
Twenty-One Days
Next, banks that supply the funds for your credit card must send out your monthly billing statement no later than twenty-one days before it’s due. Late bills are always a pain in the posterior region, and it’s a common trick for a credit card company to pull, sadly. A few late bills and-BOOM-you’re in debt thanks to punitive late fees. Now, however, banks are legally obligated to get your bill to you on time, every time. It makes a lot of difference, trust me.
Late Fees
Speaking of late fees, thanks to the new legislation, if you get your payment in by five PM on the due date, it’s in and you can incur no late payment penalties. No more early morning deadlines (another credit card company trick, and one that a lot of people have fallen for without realizing it) or late fees due to banking weekend or holiday hours. That means if your due date is on a Sunday, and your payment doesn’t go through until Monday, you won’t be penalized.
Highest Interest First
When paying different balances on the same card-cash advance and credit, for instance-the credit card company will now have to apply your payment to the balance with the highest interest, as opposed to whichever they fancy. And speaking of cash advances, banks will now require your express permission to allow you to go over your credit limit.
These are only the biggest changes to the way credit card services now work, thanks to the new legislation. All in all, the changes will make it harder for the credit card company to hinder you in paying off or paying down your accrued debt – your credit card costs should be less. However, this doesn’t mean that you’re in the free and clear. You’ll still need to pay on time, every month if you intend to clear your debts. But the new credit rules will make it somewhat easier from now on, which is a nice change of pace.
Janet
January 20, 2011
January 19, 2011
Credit Card Interest Rates – A Concise Explanation
Stephen Chua asked:
When you apply for a credit card, all the different type of interest rates mentioned on the application form probably confuses you.
The most common interest rate is the APR, which credit card companies like to quote as the “interest rate” for using their card. This is known as the Annual Percentage Rate, which is calculated on a yearly basis.
However, credit card companies do not do their interest rate calculation once a year. They do it on a monthly basis. The interest is applied to your unpaid outstanding balance is calculated by dividing the APR by 12. This is called the monthly periodic rate.
Every month, this monthly periodic rate is applied to whatever outstanding balance that is not paid. This is the compounding effect of interest rate and is refer to as compounding interest. By factoring into the compounding effect, what have is called the Effective Annual Rate (EAR). This rate is much higher than the quoted APR rate.
Most of the credit card companies will offer two type of APR for their cards. The first one is the introductory rate, which is a very low rate and last for six months to a year. In many cases, the introductory rate is zero percent. Once the introductory period is over, second type of APR will comes in. This is often called the ongoing APR, which can be a huge jump from the introductory interest rate. Thus it is imperative to check the ongoing rate before applying for the credit card.
In addition, the ongoing APR can be fixed or variable.
A variable APR means that the rate will fluctuate according to changes to economic indicators such as the Prime Rate or the LIBOR Rate.
On the other hand, a fixed rate is not dependent on such economic indicators but it does not mean it stay unchanged over time. The credit card company can, and will, change it if necessary. However, it will do so after giving you some form of notification first. Unless the economy is facing some serious problem, the fixed APR can stay unchanged for many months.
The all the interest rate stuffs is making your head swim, you just need to do one thing. And that is to pay your credit card balance in full and on time. If you do this every month, there is really no need to worry about the interest rate.
Eric
When you apply for a credit card, all the different type of interest rates mentioned on the application form probably confuses you.
The most common interest rate is the APR, which credit card companies like to quote as the “interest rate” for using their card. This is known as the Annual Percentage Rate, which is calculated on a yearly basis.
However, credit card companies do not do their interest rate calculation once a year. They do it on a monthly basis. The interest is applied to your unpaid outstanding balance is calculated by dividing the APR by 12. This is called the monthly periodic rate.
Every month, this monthly periodic rate is applied to whatever outstanding balance that is not paid. This is the compounding effect of interest rate and is refer to as compounding interest. By factoring into the compounding effect, what have is called the Effective Annual Rate (EAR). This rate is much higher than the quoted APR rate.
Most of the credit card companies will offer two type of APR for their cards. The first one is the introductory rate, which is a very low rate and last for six months to a year. In many cases, the introductory rate is zero percent. Once the introductory period is over, second type of APR will comes in. This is often called the ongoing APR, which can be a huge jump from the introductory interest rate. Thus it is imperative to check the ongoing rate before applying for the credit card.
In addition, the ongoing APR can be fixed or variable.
A variable APR means that the rate will fluctuate according to changes to economic indicators such as the Prime Rate or the LIBOR Rate.
On the other hand, a fixed rate is not dependent on such economic indicators but it does not mean it stay unchanged over time. The credit card company can, and will, change it if necessary. However, it will do so after giving you some form of notification first. Unless the economy is facing some serious problem, the fixed APR can stay unchanged for many months.
The all the interest rate stuffs is making your head swim, you just need to do one thing. And that is to pay your credit card balance in full and on time. If you do this every month, there is really no need to worry about the interest rate.
Eric
January 17, 2011
Credit Card Debt – Interest Rates May Double Or Triple!
Trace Morgan asked:
There are few of us that do not have credit problems at some time in our lives. Temporary job loss, and accident or illness – anything that disrupts our ability to earn a living or to keep to our budgets can cause havoc on our credit reports. If the problem is a temporary one, it’s common for people to juggle the bills, pay what they can and assume that as soon as they catch up everything will be normal.
Did you know your credit card interest can go as high as 36%? In 1978 the Supreme Court decided that interest rates could be based on the rates allowed by the state where the credit card company did business. Prior to that, banks issuing credit cards could charge no more than the usury rate (the highest interest rate allowed) for the state were the customer resided. The was a sweeping change – and is the reason so many credit issuing banks are located in states such as Delaware and South Dakota where high interest rates are allowed.
The huge problem for you is that one late payment on one credit card can result in all of your credit cards having the interest rate raised to more than 30%. There was a time when you could call your creditor and have a late payment approved but the sheer size of the credit industry now doesn’t allow for personal consideration.
You might think you are protected because you’ve had the same credit cards for years and have faithfully paid month after month. You would be wrong. Initially, credit card companies were not quick to raise rates on good customers and if you were late on a couple payments you might see an increase of 2-3% in the interest on your credit cards.
For years, banks and credit card institutions focused on giving customers as much credit (and sometimes more) as they could handle. The monthly payment on these revolving accounts was only 2-2.5% of the balance plus the monthly interest. In 2005, Federal Regulators called on these corporations to raise the payment to 4% of the balance plus the interest rate. This caused monthly payments to be higher for consumers. Shortly after that, the financial corporations began the current practice of changing the interest rate of a customer to the highest allowable rate (30-36%) immediately after any sign of financial weakness in the customer’s credit.
In reality, the result is that $10,000 on credit cards at 9% in 2004 required a payment of approximately $285 a month. That same $10,000 of credit card debt can now require as much as $675 as the monthly payment. Such an increase is more than many budgets can handle, and the predictable result has been an increase in bankruptcy filings directly due to credit card debt.
Protect yourself out there,
Trace Morgan
Clarence
There are few of us that do not have credit problems at some time in our lives. Temporary job loss, and accident or illness – anything that disrupts our ability to earn a living or to keep to our budgets can cause havoc on our credit reports. If the problem is a temporary one, it’s common for people to juggle the bills, pay what they can and assume that as soon as they catch up everything will be normal.
Did you know your credit card interest can go as high as 36%? In 1978 the Supreme Court decided that interest rates could be based on the rates allowed by the state where the credit card company did business. Prior to that, banks issuing credit cards could charge no more than the usury rate (the highest interest rate allowed) for the state were the customer resided. The was a sweeping change – and is the reason so many credit issuing banks are located in states such as Delaware and South Dakota where high interest rates are allowed.
The huge problem for you is that one late payment on one credit card can result in all of your credit cards having the interest rate raised to more than 30%. There was a time when you could call your creditor and have a late payment approved but the sheer size of the credit industry now doesn’t allow for personal consideration.
You might think you are protected because you’ve had the same credit cards for years and have faithfully paid month after month. You would be wrong. Initially, credit card companies were not quick to raise rates on good customers and if you were late on a couple payments you might see an increase of 2-3% in the interest on your credit cards.
For years, banks and credit card institutions focused on giving customers as much credit (and sometimes more) as they could handle. The monthly payment on these revolving accounts was only 2-2.5% of the balance plus the monthly interest. In 2005, Federal Regulators called on these corporations to raise the payment to 4% of the balance plus the interest rate. This caused monthly payments to be higher for consumers. Shortly after that, the financial corporations began the current practice of changing the interest rate of a customer to the highest allowable rate (30-36%) immediately after any sign of financial weakness in the customer’s credit.
In reality, the result is that $10,000 on credit cards at 9% in 2004 required a payment of approximately $285 a month. That same $10,000 of credit card debt can now require as much as $675 as the monthly payment. Such an increase is more than many budgets can handle, and the predictable result has been an increase in bankruptcy filings directly due to credit card debt.
Protect yourself out there,
Trace Morgan
Clarence