What Is My Credit Card Interest Rate?
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A credit card interest rate — also called an annual percentage rate or APR — refers to the extra amount you'll owe each month if you don't pay your credit card bill in full.
Here are some answers to basic questions about your APR.
What is a credit card APR?
A credit card APR represents the cost of borrowing money that you don't pay back right away.
If you pay only the minimum balance each month, or anything less than the full amount owed, you'll be charged interest based on your card's APR.
Another way to think about it is that it's similar to taking a loan on the unpaid amount if you don't pay the bill in full.
On the other hand, if you pay the full balance of your credit card bill each month, you'll pay no interest and the card's APR will be inconsequential.
Credit card companies state their interest rates as APRs — "annual" percentage rates — even though you're usually paying the bill monthly, and interest is assessed on your average daily balance. To get into the math of APRs, read about how credit card interest is calculated.
How do I find my credit card interest rate?
You can usually find the card's primary APR, expressed as a percentage, easily in the app or on the card issuer's website. You can also find it on your monthly statement or call the phone number on the back of the card and ask the customer service rep. In addition, the rate will surely be in the most recent version of the card's terms and conditions.
In the terms and conditions — essentially the fine-print legalese — you'll find a table called a Schumer box at the top. It's a federally required disclosure of rates and fees. Your APR will feature prominently in the table.
You may also see other types of APRs.
Different types of credit card APRs
A single card could have several different types of interest rates.
Fixed vs. variable. A few rates are fixed, meaning the percentage doesn't change over time, although even fixed rates can occasionally change. Most are variable, meaning the interest rate can change and often does.
Ongoing vs. temporary. Many APRs are ongoing rates. But some rates are promotional, lasting a set period. For example, you might be offered an introductory interest rate as a new customer. It might be temporary, such as the first 12 months of having the card.
Here are some common types of APRs:
Purchase APR. This usually refers to the primary APR for the card. It applies to new purchases and your existing balance when you carry a balance. However, as noted above, cards can have a different introductory rate for new purchases for a period.
Balance transfer APR. Some cards are designed with a 0% APR period for balances transferred onto the card. For example, you might see, "0% intro APR on balance transfers for 18 months."
Cash advance APR. If you use your credit card to get cash, like out of an ATM, you'll typically incur a very high APR that starts immediately.
Loan rates. Some card issuers allow you to use your credit line to take out a loan. For example, Chase has a feature called My Chase Loan. Citi calls its version Citi Flex Loan. They have their own APRs. These tend to be lower than the cash advance APRs.
Payment plan APR. Such as above, some cards have special features that allow you to identify purchases and make payments on them over time. That feature could have its own APR. Examples include: American Express' Pay It Plan It®, My Chase Plan and Citi Flex Pay.
Penalty APR. If you fail to make the minimum payment on time, the issuer might raise your overall APR substantially to a penalty rate.
Again, you can find all these rates disclosed in your credit card's Schumer box.
In the Schumer box, you might see other numbers expressed as percentages. But some aren't APRs. Some are fees, such as foreign transaction fees, balance transfer fees and cash advance fees. Those are one-time fees, not ongoing rates that apply to purchases or outstanding balances.
What affects my interest rate?
Your credit card issuer can change your interest rate. Here are some factors that affect the rate.
Market conditions. Prevailing short-term interest rates directly impact the rates you'll pay on your credit card. They mostly move in lock-step. When short-term interest rates go up, such as the prime rate, rates on your credit card are likely to rise. Your card's terms and conditions might say: "We add 12.74% to 19.74% to the prime rate to determine the APR … ." In that case, if the prime rate is 3.25, your APR would be 15.99% to 22.99%. So when you hear that the Federal Reserve raised interest rates, that means your credit card debt will get more expensive.
Card type. Some cards are designed to offer lower-than-average interest rates, while others charge high rates because they focus on other features, like rewards. In general, credit unions are known for issuing cards with lower-than-average APRs. On the other hand, premium travel credit cards generally charge high rates.
Your creditworthiness. You'll often see APRs expressed as a range, like "15.99%-22.99% variable APR." As with many types of loans, people with better credit generally get lower interest rates. But, again, if you miss a payment, you could see your APR rise.
Now, when you see that disclosure about a credit card APR, you'll know what it precisely means.
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