Things to know about credit card interest

The most important thing to know about a credit card is its interest rate. The interest rate is defined as the extent of an advance that is charged as an interest to the borrower commonly expressed as a yearly percentage of the advance outstanding. Many people look for the best credit card interest rates.

The first thing to learn about interest is that how it is charged. To find that you should first look best credit card interest rates. The credit card interest rate is also expressed as an annual percentage rate. The interest rate which is applied to your balance is according to your billing statement. Most of the credit card companies provide a grace period in which you can pay your full credit card balance and do not pay any interest. If any balance is left after the grace period then an interest will be charged in the form of a finance charge.

The finance charges are calculated in many ways which depend upon the terms of your credit card. Credit card issuers calculate these finance charges on the average balance of the credit card. Finance charges sometimes include new purchases which are made on your credit card, and sometimes the finance charges do not include the new purchases made on your credit card.

They are two types of interest rates. One is fixed interest rate and the other one is the variable interest rate. The fixed interest rates can only be changed on some certain circumstances and the issuer of the credit card must send a notice before changing your advance interest rate. On the other hand, the variable interest rate can only be changed when the index rate changes. In the variable interest rate, the issuer of the credit card does not give a notice when the variable rate changes if the change is the result of an increase in an index rate. Most of the credit cards provide variable interest rates.

There are different kinds of APRs. Credit cards have different APRs for different kinds of balance. When you make a payment with a credit card which has different balances on different APRs. Any amount more than the lowest payment goes to the balance having the highest APR.

The credit cards also have periodic interest rates, which is one more method for stating the regular APR for a period of time which is less that. The periodic rate of interest per month is the APR divided by the number of months of a year. The periodic rates base on billing cycle which is shorter than a month. Daily rate is also another periodic rate. To find the daily rate you have to divide the APR by the number of days of the year.

The issuer of the credit card increases your interest rate sometimes for example when your credit card terms default, when there is an increase in the index rate when the expiry of a promotional rate comes, etc.