Annual percentage Rate or APR is calculated on a credit card annually and the interest rates are paid annually. There are no standards for APR`s in the credit card industry. APR`s can vary from one Card Company to another as well as on individual accounts from the same company. Hence, by understanding APR`s one can get a better deal on the card. One must always make comparisons before choosing the card with the lowest APR`s.
There are 2 types of credit card APR’s. They are:
Fixed – here the annual percentage rate remains constant and does not change except under extraordinary circumstances. It might change if the card holder asks for a reduction in rates from the card company, and when it is granted. If the card holder makes a late payment then the company can raise the APR as per the contractual obligations as per the agreement.
The APR`s on a fixed rate credit card may vary from 0 during the introductory period or to over 20% for customers who are considered high risk. However, the regular APR`s would depend upon the credit history of a person as well as the payment history with the card company.
Variable – a variable APR will fluctuate based on prime interest rates. Variable rates are usually 3 points over the prime rate.
However, if you have a good rating with the card company you may find it easy to shop around for cards that carry low interest rates. After checking with other card issuers you can always call your card company to check, and see if they can give a similar offer to you. If that is not possible then you always have the option of opting for a new card that carries a low APR, and can do a balance transfer onto a new account. You may be lucky to find a new card company that might give you 0 APR on balance transfers for a fixed period.
There is also a word of caution here. Before applying for any cards with a low APR, read the fine print associated the card agreement, and check to see when, and how the issuer can raise the APR, and under what circumstances. These could include late payments or going over the credit limit. Also the APR`s on cash advances are always higher than the APR`s on purchases. So make sure you check these things thoroughly.