• The annual percentage rate on a credit card is what determines how much interest you pay if you carry a balance on the card, take out a cash advance or transfer a balance from another card to the new card.

    Keeping a Balance

    When you do not pay your credit card in full, and carry a balance over to the next month, you pay interest on that money. New purchases, cash advances and balance transfers that carry over to the next month all require you to pay interest. The larger the amount you carry over month to month, the more you pay in interest over time.

    Late Payments

    If you miss payments or are late in making your payments, your interest rate may increase, so your APR will be higher.

    Introductory APR

    To get people to apply for a credit card, companies often offer a very low introductory APR. Credit card companies sometimes raise that rate after six months.

    Tiered APRs

    Some cards charge different interest rates depending on your outstanding balance. With these cards, higher balances usually have a higher interest rate.

    Fixed vs. Variable

    Some credit cards have a fixed rate APR that is not designed to change often unless you are delinquent in your payments. Credit card companies must notify you if they are going to change your rate. Other cards are variable, where the rate changes based on the prime rate. If the prime rate changes, your interest rate may change too.


    The Federal Reserve Board; Choosing a Credit Card

    Find Law; Summary of The Credit Cardholders' Bill of Rights Act

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