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Credit card debt management isn't a game. But there are rules. Lot's of them. And most people who don't understand those rules feel like they're always on the losing side, while their credit card companies tend to come out ahead. You don't have to be like that! Learn the rules about APR, and you'll be on the path to feeling in control of your credit card debt. Here are some important questions that will help you get the lowest APR in the category you need most. Ask these questions before you apply for any credit card:
Fixed or Variable?
This question is pretty self explanatory! Fixed APRs remain constant from month to month throughout the life of your credit card. While credit card companies do increase APRs periodically to keep up with the market, they must notify you in advance of any interest hikes. Variable interest rates will fluctuate. This is because a variable interest rate is generally contingent upon another standardized interest rate, such as the US Treasury bill rate or the prime rate.
How Long is the Grace Period?
Most credit cards offer a grace period for regular purchases. A grace period is the amount of time you have to pay a bill in full before your credit card company can start charging interest. Generally, you have 25 to 30 days from the time you purchase something with your credit card to make a payment before interest can accrue. However, grace periods may not apply to cash advances or balance transfers. These types of transactions may collect interest immediately.
How Will My Finance Charge Be Calculated?
Credit card companies calculate your finance charge using several models. When you apply for a new credit card, find out if your APR will be calculated over one billing cycle or two. You should also find out if your credit card company uses the adjusted balance, the average daily balance or the previous balance. Finally, you need to find out if your monthly periodic charge will include or exclude new purchases in the balance. Generally speaking, you can expect to have a lower monthly periodic payment if your credit card company charges you based on a one-cycle billing with one of the following models: the average daily balance model in which new purchases are excluded; the previous balance model; or the adjusted balance model.
How About Other Fees?
While you may be offered a spectacular APR with a new credit card, don't forget to ask about the fees. You may be expected to pay a $35 to $70 annual fee just to access your account. Additionally, there may be steep fees for cash advances and balance transfers. You should also expect to be charged fees for any late payments, going over your credit limit, and even for returning a product! It's very possible to find a low APR credit card with quality credit terms. But if it sounds too good to be true, ask about fees!
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