Whether you're applying for a credit card online, via phone, or replying to an offer in the mail, there's always a chance you may receive a higher interest rate than the one dangled before your eyes. In fact, many credit cards come with not one, but three different possible annual percentage rates.
As an example, we'll examine a popular credit card that offers Elite, Premium, and Standard pricing. The Elite APR will be the lowest. Let's say its 14%. This rate will be given to applicants with very good to excellent credit. Premium pricing will generally fall somewhere in the middle of Elite and Standard pricing. An average rate for a Premium APR may be around 18%, and this will offered to individuals with good, but not above average credit histories.
Standard pricing is offered to consumers with Fair/Average to slightly below good credit. This rate, using our example card, would be around 23%, more than 50% higher than the elite level.
Unfortunately for consumers, credit card companies don't inform you of the pricing level you will receive until your application has been processed and your credit card is mailed. However, there are steps that can be taken to avoid being tricked into running up a high bill on a credit card with a high interest rate:
1.) Review your new credit card once it has arrived in the mail. The card will disclose your precise annual percentage rate. If you have been slapped with a Standard APR, you can simply cut it up, only use it when you can pay it in full, or simply put it aside for emergencies.
2.) Apply for more than 1 credit card and choose the one with the best rate. Different credit card companies may offer you different rates. To one company, you may be considered a Premium customer and given an average APR. However, another company may consider you an Elite customer. Simply keep the card that offers you the best interest rate.
3.) Pay your bill in full each month, or as soon as possible. If everyone paid their credit card bills on time, credit card companies wouldn't be rolling in profits. However, if you pay your bill in full every month, the interest rate on your card won't matter, as credit card companies offer a grace period of around 25 days during which new purchases do not accrue interest.
4.) Take advantage of 0% introductory rates. Nearly every credit card on the market offers a 0% interest rate to new cardmembers for between six and fifteen months. If you don't intend to pay your bill in full every month, a one year intro rate can save you a substantial amount of money that would have been wasted on interest charges.
The author operates SmartCreditChoices.com, an online credit card comparison site featuring links to nearly 100 credit card applications. To view the details of current credit card interest rates and 0% credit card offers, visit SmartCreditChoices. |
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