Understanding everything related to credit card payments and credit card loan interest rates is important before applying for a credit card. While reading the terms and conditions that come with your credit card, and discussing your questions with your credit card issuer can be done, preparing yourself in advance with the basics of credit card interest rates are recommended. For this reason, we have compiled the below information on credit card interest rates.
What is a Credit Card Interest Rate?
In return for borrowing money, your credit card issuer provides you with a rate that you have to pay. Credit cards come with different specifications. On average, however, you would only have to pay this credit card loan interest if you miss making a credit card bill payment on time. Interest rates vary depending on which credit card issuer you approach. Interest begins to accrue when you miss paying your credit card bills. In this situation, the interest gets charged on your previous outstanding bill, which subsequently gets added to your current month’s outstanding bill.
It is important to remember that you may be subject to the payment of several types of interest rates depending on the kind of amount you owe. Interest is charged on a late credit card bill payment, cash advance, balance transfer and minimum amount due. The interest rate for each of these balance types vary significantly, and it is important to ask your credit card issuer for a list of these different interest rates before applying for the credit card. Any amount that you pay that is above the minimum amount due on your credit card bill is automatically directed towards the coverage of the credit balance that has the highest interest rate.
Types of Interest Rates
Most consumers are not aware of the different types of interest rates that can be charged on your credit card outstanding balance.
Fixed Interest Rates: As the name suggests, this type of interest rate is fixed and does not change over time. If your credit card issuer wishes to change this interest rate, they must notify you of this change before the rate changes.
Variable Interest Rates: As the name suggests, this type of interest rate changes frequently. Your credit card issuer does not have to notify you of this change in advance, as it is clearly mentioned and accepted when you apply for such a credit card. This is the most common form of interest rate. This type of interest rate changes only when the base or index rate changes. This index rate is determined based on a specific change in another tied-up rate.
It is important to bear in mind that if you are not comfortable with a rise in your interest rate, you can opt out of it. This can be done by merely sending a letter to your pertinent credit card issuer stating that you wish to opt out of this high interest rate payment. This has to be done within a 45 day notice period. Opting out of the payment of a high interest rate will result in you continuing to pay interest at your previous rate. However, not every credit card issuer provides this opt-out facility.
Credit card issuers sometimes offer their customers credit cards that have interest-free periods. These interest-free periods vary depending on the type of credit card you own. Certain credit cards come with an interest-free period immediately after you pay the joining fee as a welcome gift. Other credit cards come with interest-free periods as part of your credit card’s reward structure, after you keep making the total outstanding balance payments every month, over a certain period. Interest-free periods are not provided to those individuals that carry forward their outstanding balances to the next month for any reason, and those individuals who withdraw cash against their credit limit. In other words, you need to be in good standing with your credit card issuer in order to enjoy the privileges of an interest-free period.
The more you understand everything there is to know about credit card interest rates, the more prepared you will be before making a credit card investment. The rates hold the power to make life easier or worse for us. You can opt for credit cards that come with low interest rates, such as the Bajaj Finserv RBL Bank SuperCard. It is imperative that you know about the different interest rates associated with a credit card before you apply for one.