Remember That Interest Rates Could Vary Across Providers

Category: Finance, Credit.

Most people will agree that having a credit card is a great way to move towards a more responsible and independent way of life. However, if you are convinced that you are responsible enough to use a credit card wisely, you should go in for one.

The truth is you need to be extremely cautious when applying for a credit card, as it is a complex web of fees, and interest rates, charges( not to mention hidden clauses and terms which are not only illegal but also financially dangerous) which can sink you deep in debt. But first, you will need a layman's crash course on credit card interest rates before you secure and swipe your card at the first opportunity. But usually the means for assigning interest rates on an applicant is based on his credit history. Generally speaking, different applicants may get different interest rates. If your credit history is good, the interest rate that you are approved for will be a fairly good one. This may be done the hard way, by taking the brunt of the compromised interest rate which the bank will assign to you, or to choose a plan with a lower credit limit so that the interest rate follows accordingly. If this is not the case, you would have to work at improving your credit score.

A prepaid credit card could also be a viable option. Sure enough, there are low interest credit cards or even zero percent interest plans which are available, there is a, but as expected catch: most of these low interest cards have only a short, say six- month, period during which the interest is low. But this method of rebuilding credit is hard to secure and it charges even higher interest costs. Once this introductory period is past, a higher rate takes its place. However, these plans tend to be short term in their outlook. For a monthly or annual fee, service alerts are offered, informing the borrower as to when his low interest period is due to expire.

They do not have the lasting appeal of some other plans. This means that the issuer gets a higher payback in interest rate from the transaction than usual. Some credit cards can also be used in an ATM to take out funds within the credit limit, but the interest is usually charged from the date of withdrawal, and not from the monthly billing date. Make sure that you are clear about the terms that your credit card provider is offering. Some may lure you with teaser offers of low rates for a certain period, whereas the regular rates can get as high as 40 percent. Remember that interest rates could vary across providers.

Since there are no fixed regulations concerning interest rates and penalties on late payments, some issuers forfeit the teaser rates if the borrower does not make the payment on time, and replaces it with a penalty interest rate. You should keep an eye out for the card that is the most affordable. Some can even be so unscrupulous as to charge interest even if the balance is fully paid on the due date. However, the low rates are not enough. One must make sure that the other terms are not difficult to deal with.