There are different types of interest rates that a bank will issue to their credit card holders. Learn the different interest rate terms that credit cards offer. The best interest type depends solely on your personal needs. What is great for your neighbor, may not be good for you. Taking the time to learn about interest rates can save you a lot of money in the future. So what are the different types interest and interest rate terms for credit cards? There are basically three types of ways a credit card company charges you interest on your credit card.
Different Types of Interest Rate Terms on Credit Cards
Fixed Rate
A fixed rate of interest is an interest rate that does not fluctuate and remains locked. Typically the only time a fixed rate of interest can change is if a customer misses too many credit card payments. Read the terms and conditions of your credit card agreement to learn bank policies. A credit card with a fixed interest rate is good for people with good credit that carry credit card balances from month to month. These card holders either pay the minimum payment or make a larger payment each month.
Variable Rate
A rate that can increase or decrease with the changes of the Prime Rate. The interest rate terms will periodically change with this type of credit card. Interest rates are set by market conditions and bank lending rates. This type of credit card is good for people with all types of credit styles. Whether you pay your entire balance off each month or carry a balance from month to month, this type of credit card may suit your needs.
Introductory Rate
A low rate of interest offered for a limited time, usually for the first 3 to 6 months on being a cardholder. Sometimes a special interest rate promotion can offer a 0 or low-interest rate for 12 or 18 months. To qualify for this special rate you will need to have very good to excellent credit. This type of credit card is good for balance transfer and any large purchase. The 0 rate of interest allows a card holder to have some time to pay off their debt without incurring interest charges. Make a careful note before applying, to learn the interest rate after the special promotion ends. Many times the new interest rate can be rather high. It is a good idea to pay off credit balances off as soon as possible to avoid high-interest charges.
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