Low Interest Credit Cards: The 0 APR Credit Card
Article by Chris McCullough
Low Interest Credit Cards: The 0 APR Credit Card – Family
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If you live in the United States and spend money, you probably own a credit card or are at least thinking of owning a credit card – so maybe you’re wondering what a low-interest credit card or 0 APR credit card is.
When you fill out a credit card application and then receive your card, you are essentially agreeing to pay off that plastic on a monthly basis. The credit card company affords you a certain amount of money every month and then you are required to pay a certain balance month to month. This balance consists of some sort of mathematical calculation involving the charges you accrued on the card, the interest rate, and whatever payments you make.
No matter what financial institution issued your card, there is a pretty standard way that it determines the amount of money you owe. It is called the “average daily balance” method and basically, the bank or credit card company will monitor your spending every day, gradually adding charges and subtracting payments. They can then conclude two different totals, that of your charges and payments and proceed to average those numbers. Then they multiply that average by an interest rate. This is your balance! The “adjusted balance” method is different and actually tends to favor the consumer, while the “previous balance” method benefits the card issuer. But these last two systems are not as common as the “average daily balance” system (which is the fairest of the three anyhow).
Then there is the interest rate, determined individually by each card issuer. A “fixed rate” is just what it sounds like – you will pay a specific interest rate every month, no changes. And if there are changes, a financial institution is required to inform you ahead of time. A “variable rate” is more liable to change however, as it depends on the Federal Reserve and other indexes and then whatever percentage the lender adds on to the final finance charge. There are a variety of calculations involved for either type of interest rate, and frequently variable rates will dip much lower than fixed rates. However, with a fixed rate, a cardholder knows exactly what balance to expect at the end of every month and thus, can budget accordingly.
Also note that when you spend over your limit or fail to make payments on time, other charges will accrue. (This will hurt your bank account and credit report.)
Now, we come to the low APR credit card and the 0 APR credit card. The APR is the yearly percentage rate of the finance charge, or whatever you pay to use credit. Some credit cards offer low APR, or 0% APR, to start out with, but it eventually increases. So a 0 APR credit card is like a credit card with training wheels, or it can be more of a malicious way to bait new customers. Think about it – a credit card company is probably not going to make much profit if it doesn’t charge interest!
Low-rate cards are the only way to do credit really, as high-rate cards will end up costing you considerably more than you ever originally planned on spending and it they will make it very difficult for you to stay out of debt. Just be cautious of rates that sound a little too low.
About the Author
Chris McCullough is the founder of CreditcardSuperstar.com, a credit card shopping service which allows consumers to shop, compare and apply for low interest rate credit cards online. The leading site offers over 75 different credit cards from Discover, Chase, American Express and other top banks and financial institutions. A free report on how to get the best credit card and avoid common mistakes is available at http://www.creditcardsuperstar.com.
Use and distribution of this article is subject to our Publisher Guidelines
whereby the original author’s information and copyright must be included.
Chris McCullough
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Chris McCullough is the founder of CreditcardSuperstar.com, a credit card shopping service which allows consumers to shop, compare and apply for low interest rate credit cards online. The leading site offers over 75 different credit cards from Discover, Chase, American Express and other top banks and financial institutions. A free report on how to get the best credit card and avoid common mistakes is available at http://www.creditcardsuperstar.com.
Use and distribution of this article is subject to our Publisher Guidelines
whereby the original author’s information and copyright must be included.
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