interest rates News and Advice

Credit cards love to dish out teasing promises: “0% interest on purchases and balance transfers for 12 months”; “9.9% fixed APR”; “3.99% life-of-balance transfers!” But these promotional rates are sometimes just a guise; they have little to do with how much a credit card will actually charge you. If you carry a balance on your credit card – even sometimes – the interest rate you pay can make the difference between credit cards being a convenient financial tool and or a personal finance nightmare.

Sorting Out Credit Card Interest Rates

Every credit card has to clearly list its interest rates, fees, and other card member terms – either on the back of a printed card solicitation or on a webpage linked from the bottom of a credit card application page. (Hint: Check the fine print at the bottom). Knowing how to read these credit card terms is critical to finding a credit card that will not rip you off.

When reading credit card terms, you will encounter several different types of interest rates. Here is what they all mean:

The Federal Reserve meets next week to decide whether to lower interest rates for the second time this year. What could their decision mean for borrowers? The interest rates set by the Fed affect the prime interest rate, used by many credit card companies to set the regular interest rates consumers pay on purchases and balance transfers. If the Fed cuts rates again next week, chances are your credit card interest rates will go down. The Federal Reserve typically makes interest rate adjustments in quarter-point intervals, meaning its target rate would drop from 4.75% to 4.5% and the prime rate will drop from 7.75% to 7.5%.