70.2% of American households have at least one credit card. Credit cards can be a great way to give you peace of mind since you’ll know you’re covered in the event of a financial emergency. They can also help you improve your credit rating, and you can make the most of signup bonuses and perks like points and miles.
However, not all credit cards are equal. The interest rate you pay will have a massive impact on how fast you can pay off credit card debt. Read on to learn how you can find the best credit card rates this year.
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How Do Credit Card Interest Rates Work?
Ideally, credit card holders would never carry a balance on their credit cards. However, many Americans do carry a balance from month to month.
Most credit cards will have an interest rate. While some will have an interest-free period of six months or more, banks and credit card companies charge you fees to spend their money.
Credit card interest is known as the APR which stands for annual percentage rate. While it’s expressed annually, your credit card company will use it to calculate how much interest you should be charged each month.
Your credit card could have a variable APR or a fixed APR. Generally, credit card companies will give you a grace period between the date that you make a purchase and the date that the payment is due. This is often 21 days. If you pay off the remaining balance in full, you won’t be charged any interest for the purchases you made during that time period.
Finding the Best Credit Card Rates
It’s important to remember that the best credit card rates for you will often depend on your financial history and how you plan to use the card.
Here are some steps you can take to find the best credit card rates:
Know Your Credit Score
The better your credit score, the higher your chances of getting approved for a card with a lower interest rate and better perks.
Many banks and credit card companies give cardholders access to their FICO scores for free. Most lenders and credit card companies will check your FICO score as part of their decision as to whether they should give you credit.
You may find that your credit score isn’t what you were expecting. You can then check your reports to see what has caused the problem. You may have forgotten about a bill or fallen victim to a credit reporting error or identity theft.
Consider Your Needs
There are three main types of credit cards.
- Cards that earn you rewards
- Cards that have low-interest rates
- Cards that help you improve your credit score
While you may be looking for a low-interest rate, you could find that a credit card with a slightly higher rate may be worth the rewards. And if you’ve had problems with credit in the past, you can rebuild your credit with a card created for this purpose.
Here are some things to consider:
Secured credit cards will usually require a security deposit. In return, the card issuer will report your regular payments to credit bureaus.
This is a great option if you’re hoping to get a credit card with a lower interest rate down the line since you can use it to increase your credit score. Just be sure to always pay your bill on time and avoid using more than 30% of your available credit.
Some cards have introductory offers with 0% APR. These will also often have ongoing low interest. If you know that you may occasionally carry a balance from month to month, this can be the best option.
If you currently have a high-interest credit card, you may be able to transfer the balance of your current card to a new, low-interest card. These are much easier to find if you have good credit.
If you know you’ll pay off your credit card balance in full each month and won’t incur interest, a rewards card can be a great option. These typically will have higher interest rates, but they’ll offer cashback, travel, and other rewards.
Contact Your Current Credit Card Company
It’s often a good idea to try to keep your current credit card since older credit cards have a positive impact on your credit report. But you should still shop around to see the best credit card rates you could get elsewhere with your credit score.
Once you’ve taken a look at the competition and you know your credit score, call your current provider.
Now is the time to be clear about what you want. If you’ve been paying off your credit card bill and haven’t missed any payments, you’ve proven that you’re a good customer. This puts you in an excellent position when it’s time to negotiate.
Ask your current provider for a lower interest rate. Don’t give up if the customer service representative you’re speaking with says no. Be polite, and request to speak with a manager or someone further up the chain of command.
You’ll be surprised at what your current credit card company is often willing to offer to keep you as a customer. If you make it clear that you’re considering switching to a lower interest rate card, they may offer you a much better rate.
If they refuse to negotiate, now’s the time to look for a balance transfer card with a lower interest rate.
With so many credit card options available, you don’t need to get stuck with a high rate. By knowing your FICO score, shopping around, and negotiating, you can take advantage of the best credit card rates.
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