Understanding the Role of APR in Credit Cards

It is said that anything in life can have its positive and negative elements, but one of the greatest examples of this are definitely credit cards. When used properly, credit cards can definitely be a very good thing. You will need to make sure that you get all of the information you can on credit cards instead of just jumping in and using your credit card any way you see fit. This will save you a lot of fees and headaches in the future.

There are a lot of different terms used in the world of credit cards. When you’re shopping for the best credit card online, you might run into quite a few different terms. One of the biggest terms that you will see often is APR, otherwise known as Annual Percentage Rate. In a nutshell, this is actually the interest that you will pay on the credit card.

There are a few things about interest that you should know. When you actually go to make your monthly payments, you will be paying a mixture of interest and principal. The portion of the money that is marked for the interest on the card goes directly to the credit card company, while the principal portion is deducted from what you actually owe on the card. The interest that you pay on the credit card actually goes to the profit side of the credit card company, while the principal you pay goes towards bringing down your debt.

This is why it can feel like you’ll never pay off high interest credit cards even though you make the minimum monthly payments. It’s important to still make sure that you’re paying off your credit cards as fast as possible, so that you aren’t accruing interest too rapidly.

Of course, it can also help to negotiate your APR before you even sign up for the credit card. You might be able to use your good credit to get a much lower APR than someone that has already had a few credit challenges. For people that already have credit challenges, you might want to think about doing a secured credit card situation in order to bring down your interest rate. It’s all about risk management, and if you show that you are someone that can handle a lot of credit, you will be seen as less risky than someone that clearly cannot handle a high balance.

Overall, once you understand the role of APR in credit cards, you should have no problem at all really making sure that you use credit cards to the fullest – get started today!