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There are many things to consider when choosing a credit provider, and APR is just one of those factors. Depending upon how your credit card works, the APR may not even be a deciding factor, and other aspects of a card may outweigh the annual percentage rate. Knowing what to look for can make choosing a card easier and will keep you from entering into a contract with terms or conditions that may cost you a great deal of money later on, or even leave you stuck with debt that will negatively affect your credit score .
The Annual Fee
Some cards charge an annual fee to have the card and its credit limit available to you. This annual fee can range anywhere from a token amount like $ 10 or $ 15 a year, to as much as $ 300 per year for some cards. Some credit cards waive the annual fee if you charge a certain amount within the time period in your contract, usually a year, and many cards do not charge an annual fee at all, but rely on the interest to make money. Also, you should be aware that your credit card company has to notify you before they raise your annual fee and you may choose to close your account at that time.
Charge Cards versus Credit Cards
Some cards do not charge an APR at all, but instead require that you pay off the balance by the end of the period specified in your cardholder agreement, usually within 30 days. However, the other side of the coin on this is that if you do not pay off your card in full, you may end up with excessive fees and your card may even be suspended until payment is made in full. A credit card does not charge a late fee the same way that a charge card does, but instead charges an interest rate, and you can make a minimum payment on the balance you owe and forward the rest to be paid later on.
Annual Percentage Rate Explained
An annual percentage rate is usually applied to any balance charged to the card that is not paid off in full. For instance, if you charge $ 100 on your card and pay off $ 99 of it, but leave a dollar until the next month, you generally won't pay interest on just the dollar, but instead on the entire amount of $ 100, and you will Continue to pay this interest on the balance, until it is paid off in full. The annual percentage rate is taken from the amount and then divided by 365, and then multiplied by the number of days that the balance was carried for, so this can add up quickly.
Credit Account Benefits & Rewards
There are some benefits that come with having a credit account however. Some businesses do require a credit card, such as car rental companies and hotels, and credit cards are very convenient for expenses when an emergency arises. Also, some credit cards provide rewards to their customers, generally in the form of points that can be spent on specific items. The standard practice is to give customers one point for each dollar that they spend, but some credit cards do give their rewards in the form of cash back.