APR or Annual Percentage Rate determines the total cost of your credit in terms of annual rate. You should carefully understand the APR and different facts related to it.

Different APRs on Various Transactions

Usually creditors allow users to use their credit cards with full freedom by giving them introductory APRs on various transactions. Promotional APRs mean that you have a lower APR on various kinds of transactions for a particular time period. The APR returns to the original point after the end of promotional period. Users can save a great amount of money by using these low promotional rates.

What to Avoid?

You should avoid penalty or default APR. These are usually the higher APRs that are imposed on the late payments. The detail of penalty APRs is within the account agreement.

Fair Comparison of Variable & Fixed APRs

You have different APRs among which some are variable or some may be non-variable. Let’s have a look on the difference between variable and non-variable APRs.

Generally, variable APRs are calculated by the addition of a margin that can be determined by the credit card issuer to the index (also called as reference rate) like the United States Prime Rate. There is a direct relationship of variable APR and the Prime Rate i.e. when the prime rate rises, variable APR rises, however, it is dependable on your issuer that when they update your rates. Your account contract contains information about variable APRs change.

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Savings plays major role in paying off your debts. Though initially savings look smaller and not enough but on long run it really works. I got a chance to meet a family; they got out of their debt amazingly. I am mentioning here in brief what they told me in brief about their success.

They were having $14,000 consumer debt; almost half of the money they owed was a result of credit card obligations. They made a plan and determined to be debt-free. They made a plan of savings and paying off their bills early. So they used a simple but working technique “save more” and they threw extra money at their debt to pay it down faster. They started to make payments before the billing due date. Read the full story

Credit card grace period is the time period, that is between the end of your billing cycle and your payment due date. This time period is usually between 20 and 25 days, allowing you to make a payment for the prior month’s purchases without accruing any interest on those items.

So this makes the due date that is stated your statement, the time when the grace period ends. After that date, the interest will start accruing ion any unpaid portion of your balance if your APR is greater than 0%.

It is also possible that the grace period is ultimately wiped out in some cases. This happens if you typically carry a balance on your credit card from month to month, and fail to pay your accounts in full.

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Most of the credit card companies make the bulk of their money from finance charges. A finance fee comprises of the extra charges that are added on to your existing balance if it isn’t paid off in full within the grace period, or before the next billing cycle.

The charges can vary depending on your balance and the APR of your credit card. Although they may seem small if you’ve got low balance of around a few hundred dollars, they can certainly add up and form a big amount if the unpaid balance is huge.

It is also possible that you won’t be doing much more than paying the interest on your credit card, if you only make the minimum payment each month, while leaving the principal balance untouched.

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