How Credit Card Interest Rates Work

How Credit Card Interest Rates Work

The interest that your credit card provider charges you is calculated as an Annual Percentage Rate (APR). Since the APR is a yearly percentage, it is divided by 12 and applied to your outstanding balance every month. For instance, consider a credit card with 20% APR, you will be charged around 1.66% monthly interest on your outstanding balance each month.
(This instance applies to a usual revolving credit card, which lets you to roll your balance over amongst billing periods. Another type of card, regularly referred to as a charge card, appears and works similar to that of a credit card but needs that you pay off your balance in full each month.)
A few credit cards have more than one APR, such as one for purchases you make and another one for cash advances you take. That is all implied out in the credit card’s terms, which you should obtain when you open your account. If you are looking for a credit card, you can generally find its terms online.

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