Credit Card Intrest Rates Can Be Intricate

Credit cards have become a staple in American society. This is why it is astonishing to me that so many people are under-informed regarding these pieces of plastic! It seems as though the part of charge cards that consumers don't quite understand is the APRs on them. Interest rates are pretty simple to understand. They are how the banks make money when loaning cash to consumers through charge cards.

When consumers use their credit cards, the amount borrowed will be added to the total balance on the credit card account. However, the balance on a charge card account is usually made up of separate sections. This is where the annual percentage rates tend to get a bit confusing for people. Each section of the balance on a charge card account will be charged a different interest rate. Here are the most common types of interest associated with credit card accounts:

Standard interest rate: The standard interest rate on a credit card is also commonly called the purchase rate. This is because this is the annual percentage rate that Americans will have to pay on balances accumulated by using the credit card for standard purchases. These standard purchases include things like gas, food and entertainment.

Introductory interest rate: Because of the overwhelming competition in the charge card industry, banks have been forced to come up with new ways to attract clients. One of these ways is by providing introductory interest rates with their credit cards. Introductory annual percentage rates are annual percentage rates that take effect the day the account is opened and will generally last for 6 to 12 months. In rare occasions, consumers will be able to find credit card accounts like the Discover More Card - 18 month balance transfer promotion where the introductory APR will last for longer than 12 months. Introductory interest rates are usually between 0% and 2.9% and once they expire, all balances accrued during the introductory period will then be charged the standard APR for the debts.

Balance transfer annual percentage rate: The balance transfer interest rate is another that came about due to overwhelming competition in the credit card industry. There are some special credit card accounts that allow consumers to transfer a balance from another charge card to them. These balance transfer credit card accounts will come with a special interest rate called the balance transfer annual percentage rate. This is the rate of interest that people will pay for balance accrued by using their credit card for balance transfers.

Cash advance interest rate: The cash advance annual percentage rate is usually one of the highest annual percentage rates on a credit card account. The cash advance APR will be charged to balances accrued by using credit card accounts for cash advances. A cash advance is any transaction where the consumer gets cash back. These transactions can take place at an ATM, over the phone or even at the point of sale in many stores.

Default APR: The default annual percentage rate is the highest annual percentage rate on a charge card account and one that people should generally try to avoid. The default interest rate takes effect only if the consumer defaults on their credit card account. Once the consumer defaults, all balances will be charged the default APR. Some ways this can happen is by making late payments or spending more than the credit limit on the charge card account.

This article was written by Joshua Rodriguez and is brought to you by:

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