Credit Card APRS & Finance Charges

What does credit card APR mean? The APR is a credit cards annual percentage rate and is the way of stating the interest rate you will pay on your card if you carry over a balance, take out a cash advance, and/or transfer a balance from another card. The APR states the interest rate as a yearly rate that you as a credit holder will pay. Each credit card you use will have one APR for purchases. They will also have different APRS for cash advances, and for balance transfers. These cash advances and balance transfers APRS are generally a bit higher than the APR for purchases. There are also what are generally referred to as “Tiered APRs.” These are different rates that are applied to different levels of the outstanding balance. The higher the balance the higher the tiered APR. Penalty APR’s are what happens if you become late in making payments. The later the payment being made the higher the APR will be, which is why a credit card holder always wants to make their card payments ON TIME. Introductory APR are often lowered rates that are given at the beginning stages of credit. After the introductory rate expires the APR will increase to a set APR amount. Delayed APR is a different rate that will apply in the future. This occurs when a card is opened that hold some sort of special such as no interest til following year or several months down the road. When that special discounted APR is over, a new APR will be set. Credit cards also differ in regards to if they have a fixed APR or a variable APR. It is up to the customer to decide which is best for themselves. However, fixed APR cards are generally more stable where as variable APRS will adjust according to the treasury bill rate. The finance charge is the amount of money that you are paying to your crdedit card company to borrow their money, and it usually depends on how much money you have borrowed on that credit card and what your APR is. Credit card companies use one of many methods to calculate the outstanding balance on your card. The method can make a big difference in the finance charge you’ll pay. Your outstanding balance may be calculated in some of these ways: Over one credit billing cycle or two credit billing cycles Using the adjusted balance/ average daily balance/ or the previous balance Excluding or including new purchases in the balance. Depending on the amount of the balance you carry and the timing of your credit card purchases and card payments, you’ll usually have a lower finance charge with one-cycle billing and either The average daily balance method excluding new purchases/ The adjusted balance method/ The previous balance method. Minimum finance charge Some credit cards have a minimum finance charge that you will be charged even if the calculated amount of your finance charge is less. These charges usually applies only when you carry over a balance from one billing cycle to the next. So if you can pay off the amount owed before your next billing cycle begins… this is best to avoid accruing a finance charge.

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