*Editorial Note: This content is not provided or commissioned by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.
This article was last updated Mar 09, 2013, but some terms and conditions may have changed or are no longer available. For the most accurate and up to date information please consult the terms and conditions found on the issuer website.
Interest rates continue to climb on credit cards. The other day one of my neighbors was walking back from checking his mail with a disgruntled look on his face. When I asked what was wrong, he told me that his credit card company bumped his interest up 10% without any warning at all. My neighbor is just one person in a long line of increased interest victims. You may encounter a similar situation in your future.
How high are credit card rates? Will they ever stop increasing? What can YOU do about them? Let's take a look at what's going on in the world right now so you can get a better feel for your options.
The Biggest and the Baddest
There are some credit card companies offering surprisingly high interest rates. For example, check the First Premier Credit Card. The company is happy to allow those with poor credit scores to apply. You will even learn if you've been approved in just 60 seconds. However, the terms are anything but good:
- Setup and maintenance fees cut down your initial credit limit significantly to $300
- There is a processing fee of $95, plus an annual fee of $75 and a monthly servicing fee of $75 annually after the first year
- The APR on this credit card starts at 36%
The Centennial Credit Card is even worse with an APR starting at 49.9%. Fees for the card include a $75 annual fee and a monthly serving fee of $6.50, or an additional $78 per year. If you were to obtain a credit card from Australia or the UK, some lenders there routinely charge between 50% and 60%.
The More Manageable Options
On the flip side, there are some credit card issuers that offer really low interest rates. These are considered some of the best low interest credit cards in the world.
The Capital One® Platinum Prestige Credit Card has an on-going APR rate of 10.90% – 20.90% variable that comes with an introductory offer of 0% until August 2016 on both purchases and balance transfers. You will need excellent/good credit to get approved for this card, but there's no annual fee. This card is ideal for anyone who qualifies, since the drastically lower interest rate saves you money. *This offer and/or promotion may have since changed, expired, or is no longer available.
The Simmons Bank Visa® PlatinumRewards is another outstanding offer. It has a low 9.25% APR and no annual fee. While it does not have an introductory offer, it does provide you with no balance transfer fee if you transfer them online at the time of applying. More so, you earn travel rewards of one point per net dollar spent to use on any airline or ticket, without any seating restrictions or blackout dates.
How to Avoid High Interest Rates
Assuming you don't want to pay these outrageous and rising interest rates, you can take some steps to avoid them. For starters, you can compare credit cards by APR to see which ones offer the lowest rates possible. When doing this though, you'll see a range of APR's your card could fall into. This is because card companies assign different interest rates to different applicants based on their credit history and score. The better your history, the lower the interest.
If you find yourself stuck with high interest no matter what, you could always pay your credit card balances off each month. I realize not everyone has the chance to do this, but if you do, you can bypass interest charges entirely. Your APR only applies to times when you have an outstanding balance beyond the credit card's allotted payoff period. this might be on a certain day of the month, or it might be within 21-30 days of a charge. Keep your balance at $0 as much as possible, and interest will never impact the joy you get from using your card.
What's the Bottom Line?
It is easy to choose a credit card when all you have to consider is the interest rate. However, most people who are paying high for credit are paying too much. Be sure to choose a credit card that offers you the best offer possible. When you see your rates increasing, it may be time to apply for a new line of credit with a better offer.
*Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.
*The content in this article is accurate at the publishing date, and may be subject to changes per the card issuer.