If you look at the stats of people who are unaware of the fact that they’re paying a penalty interest rate on their balance then you will find that the numbers are shocking. There are 50% of American card holders who are unaware of that fact.
They may know about the inflated rate, but they don’t understand why that rate has been applied to their balance. Studies has shown that, when we talk about credit cards, then what you don’t know can create a problem for your finances.
Changes to Interest Rates
Most of the people criticize the way that credit card issuers handle interest rate change notifications. They don’t make sure that the customer knows how much interest they’re paying or why.
There could be an increase in interest as a result of a late or missed payment, or that could just because the company increased their interest rates in general.
But in any case you have to be aware that card companies have the right to change your interest rate with as little as 14 days’ written notice.
Different Interest Rates
There are only 3% of American card holders who know the difference between low introductory interest rates and the much-higher interest rates that are applied to charges and cash advances. These card holders are not aware of the fact that their payments are first applied to purchases having the lowest interest rates. Since cash advances come with higher interest, so they are some of the last items that get paid off and gradually they remain there on the card for years while the company charge the interest on that.
How to avoid paying Higher Interest Rates?
The most basic advice that is given by the experts in this regard is that you should read your credit card statements carefully. You might be surprised to see the charges and interest rates that are mentioned there.
Go for a balance transfer
If you see that your interest has been recalculated, then you can either try to transfer the balance to a credit card having better terms, or you can just simply avoid making further purchases while you should pay off the offending balance.
Get Knowledge of different Interest rates and How they are applied
You should get the knowledge of the different interest rates and also how they’re applied. For instance, you might be having a credit card that begins with a 6 month period of 0% interest. After six months, the interest rate could hike up to 16%. There could be 22% interest on Cash advances and late payments might cost you 30% penalty interest.
Although Federal reserve is taking steps in this regard but as these matters are related to your own finances so you need to look out for yourself as well. Be aware of all your terms and conditions, interest rates.
