How Low APR Credit Cards Work

Posted by Nick Niesen on October 29th, 2010

Millions of people are making use of their credit cards to purchase just about anything. Because of this, it is important to minimize total fees and interests. Paying high interest rates means a lot of money wasted. Fortunately, with the existence of several credit card companies hoping to get your business, most of them offer attractive interest rates to get ahead of the competition.

The primary indicator of how much you'll be paying for credit card balances is the annual percentage rate or APR. The APR determines the total interest rates and fees you need to repay with respect to your loaned principal amount. It is a good thing that US laws in the Truth in Lending Act have required all lending institutions to post their APR. This would definitely help consumers in managing their credit card finances.

Currently, probably because of too much competition, credit card companies offer APR to even as low as 0%. Keep in mind though that nothing this good lasts too long. Usually, these are just introductory offers which last for about 90 days to a year. These are normally just marketing strategies tempting customers to apply for their credit cards.

Before committing oneself to a credit card, you must first understand all of its terms and conditions associated with its APR. Some credit cards may have different APR for different transactions. Balance transfer APR are typically lower than the APR of cash advances. Also, there might be a different APR as penalty for late payments.

Since these APR are expressed, you'd be able to compare one credit card from another. Some companies might offer a fixed or variable APR. A fixed APR does not change without due notice and is usually preset, while a variable APR changes from time to time depending on the index it is tied to. Experts may argue that it would be better to have fixed APR, but variable APR might also work for you. It all depends on your needs and usage.

Offering low APR is definitely one of the best catch for a consumer. However, low APR can only work to your advantage if you know and understand what you're doing. Since APR are applicable to your credit card balances, low APR might not prove very useful for you if you usually pay your credit card bills in full. However, it'd be better to have a low APR credit card just in case. Times bring about lots of uncertainties and we never can tell when we mighht be able to take advantage of a low APR.

Low APR credit cards can bring about several benefits, especially to those who are having difficulty in bringing down their credit card balances. So how does this work? Companies typically offer lower APR on transferred balances. If for example, you're paying this much interest for you current balance, you might want to transfer it to a different credit card company offering lower interests. This also makes low APR good in consolidating debts.

Keep in mind, that in the financial world nothing is certain. Rates can change frequently. In order to make the best value of your money, you should be wary of these changes. Most of the time, low APR are only for a certain period. If that period had already lapsed, you would be charged the normal APR which is definitely higher. In the end, it would be up to you how you can take advantage of low APR.