Can You Judge a Credit Card by Its Interest Rate?

When you are looking for a suitable credit card, what features do you use as a starting point to compare the cost of borrowing? I am sure that most customers judge a credit card by its interest rates. They think that the lower the APR, the better the offer. From the one hand that makes good sense. APR is the strongest indicator of your financial charge. It especially matters when you are going to borrow a large amount of money. However, there are other important features that you also need to take into consideration before applying for a credit card.

Interest rate is supposed to give consumers an easy way to compare credit cards. However, if you use it as the only method of comparison, you will probably end up with the wrong plastic. Let's compare two credit cards with the same balance - $1000. The first plastic has a 12% APR and $100 annual fees. The other plastic has an 18% APR and no fees. If you compared these plastics by APR, you would decide that the first card is cheaper. However, let's calculate the finance charge on both plastics. Having the first credit card, you will need to cover a finance charge of $220 per year. The finance charge of the other plastic is $180.

As a result, the second plastic turns to be more profitable. Having $100 fee can eliminate the advantages of a low APR. Don't forget to take it into account while making a comparison. If the fees for the borrowed amount are excessively high, then they will be as important as interest rates.

If you want to make a comparison more thorough, it is worth to know what finance charge you will need to pay. Some people are so impressed by low APR that they don't notice a set up fee or paid insurances. If there are additional charges, it's important to find out what they're for, whether you need them and how much you would have to pay. The more freebies - the better.

Sometimes you can come across lenders who hide the real APR behind attractive introductory rates. They snag customers by having big eye-catching banners that practically shout "0% APR". Don't compare credit cards by introductory rates. This figure is just an introductory offer. Zero interest rate on purchases or balance transfers lasts from 3 to 15 months. When the interest free period expires, you will be shifted to a regular APR that can be higher. So take into consideration the length of introductory periods. The more time you have to pay off your debt, the more beneficial plastic you will get. If your budget doesn't allow you to pay off the balance by the end of the longest interest-free period, then pay attention to APR that you will be charged afterwards.

Comparing credit cards by interest rates is the fastest and most simple method of narrowing down suitable credit card offers. However, low APR is not the bottom line. Have a close look at all features that credit cards provide. Ask the questions, determine the best options and services for your circumstances and apply for a card that matches you most.

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