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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Many people think that debt consolidation firms do not make any money and they are there just to help you out. But the fact is that although most of the debt consolidation companies claim to be non-profit, they do make a lot of money at the cost of their customer’s financial health.

The customers can be charged in many ways by these companies. Some companies deduct a percentage of the payments made to the lenders, whereas others keep the first one or two payments to cover for "administration costs". But this can really affect the customer’s credit report as it can lead to the customer being considered delinquent from the creditors’ point of view.

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Building a credit history and a credit score is extremely important as it affects your life to a great extent. Having a low credit score can make your life hard, while high credit scores can open the doors to your dreams. Many people take the first credit card offer that comes their way in order to get a line of credit no matter how much it is. Some customers don’t even bother to read the terms and conditions that they are agreeing to due to the excitement of getting their cards.

Look out for dishonest companies

Dishonest and deceitful sub-prime card companies look for such customers. Such companies can take advantage of desperate people who are in dire need of cash by:

• Spelling out contract details in vague terms
• Down-playing changes to interest rates after a specified length of time
• Extending pitifully low credit limits
• Charging exorbitant fees

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