Essentials to Compare Credit Card Rates
It is essential to compare credit card rates for several reasons.
Credit card rate is a big factor affecting purchases, balance transfers, or avoidance of high interest fees.
We need to understand the factors that affect credit card interest rate in order to have objective comparison.
Card rate is the primary basis from which credit card issuers generate revenue.
On the other hand, consumers are paying interest fee because of the privilege provided by the credit card to borrow money.
In order to compare credit card rates and help consumer in getting the lowest possible one, let us establish the factors that affect them.
Factors Affecting Card Interest Rates
The interest rate is determined according to the supply as well as the demand for credit. The high demand for credit will results high interest rate. On the other side, high supply of credit will lower the interest rate.
The following are entities or circumstances that contribute to credit’s supply and demand:
- Credit History – Personal credit history is an important determinant of interest rate. The major credit bureaus have the capability of providing this information that the issuers can rely on. The credit report covers good payment habits, defaults, foreclosures, bankruptcy and other information.The credit history can be used as basis whether a person is high or low credit risk to card issuers. This means that having a poor credit history would results to higher interest rate.
- Bank Deposits – Depositing money in the bank, adds to the available funds from which the people can get a loan.
- Government Bonds – If you buy savings bonds from the government, you are actually adding to their fund that contributes to credit supply.
- Loans – Making a loan to purchase a car or forwarding credit card balances contribute to the credit demand.
- Businesses and Organizations – The borrowing and saving activities of various businesses and organizations also affects the credit’s supply and demand.
- Inflation – If inflation occurs, lenders have to be compensated on the decrease of the purchasing power of the fund they are lending through interest payment.
Aside from the normal interest rate, most card issuers charge rate known as universal default rate. If a consumer is late on his/her payments to any type of loan, the card rate will increase and may affect the credit score.
The Low Introductory Rates
Your effort to compare credit card rates should consider the offers of credit card companies for low introductory interest rates.
The low introductory rate is commonly offered in order to entice new cardholders.
- Consumer must take note on the period involved in comparing credit cards with introductory rate.You can choose the credit card that has longer period of introductory rate to maximize the benefit of low interest rate.
- Another consideration is to check on the variable purchase APR after the introductory period. This is a good point to compare credit card rates.
All the effort of analyzing and comparing would be futile if you fail to consider one crucial detail, which is your credit score. You have to check whether you require a credit score improvement. In doing that, you have to get a copy of the report and do a personal assessment of your rating. This is essential in the task to compare credit card rates