Understanding Your Credit Card Interest Rate

February 22, 2010 | By Xpert In Credit Card Fees | Comments(0)

Sometimes trying to understand your credit card interest rate may seem more like an advanced algebra class!  So what is that percentage rate that shows up on every bill? And how is it calculated?  We break it down for you.


Understanding your credit card interest rate doesn’t make it any easier to pay your bill every month but it is a good idea to  understand the fundamentals of what credit card interest is and how it is calculated.

One of the most important terms to understand is APR or annual percentage rate.  This is the rate that credit card issuers charge on the unpaid balance each month.

Even though your interest rate appears on each of your monthly bills, it is actually an annual rate.  Credit companies divide this rate over twelve months to calculate the amount of interest charged.

Here is an example.  Say for instance you have a credit card with a $2000 balance owing.  In January, you made a payment of $100.  That means the remaining balance is $1900.  This is the amount that you will be charged interest on.

Next, take the yearly rate of interest and divide it over twelve months to give you the monthly rate.  The final step is to multiply your unpaid $1900 balance by the monthly.

Although there are slight variations to this calculation with some credit card companies, most use a formula similar to this one.  From time to time, some companies will use a daily interest rate but it is not overly common.

Of course, if you pay off the full amount before the due date, no interest is tallied.  This is by far the best way to avoid many common credit card pitfalls like falling into credit card debt or letting missed or late payments affect your credit score.

When it comes to the basics of using credit cards, there are few things more important than understanding your APR.  It is more then just some number on your bill.

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Originally posted 2009-03-06 11:49:49.

Filed under: Credit Card Fees

The Step-By-Step “Fix My Credit” Strategy

December 21, 2009 | By Xpert In Credit Score | Comments Off

Photo taken by myself

If you are struggling with a less than perfect credit score, you have come to the right place. The “Fix My Credit With Credit Cards” Strategy is an awesome way to rebuild credit. Follow this plan of attack for a sure-fire way to start rebuilding your credit right away!

Before I tell you how to fix your credit score using credit cards, here’s the basics on how using a credit card can help repair your credit:

Make Regular Payments On Time

It is important to remember, that if you are using a credit card to fix your credit rating, making payments on time is crucial. Paying late will only further damage your credit score.

Keep Your Credit Accounts Organized

If you have lots of credit card accounts, lines of credit or others, close the ones you are not using. When lenders look into your credit score, they don’t want to see multiple open accounts. If you don’t have a lot of open credit, you will find lenders will be willing to offer you higher amounts. This will come in handy when you are shopping for a car or a mortgage.

Choose A Card That Is Right For Your Needs

As I am sure you know, there are thousands of credit cards available. So how do you choose which one is best? A lot depends on your financial situation and your needs.

For instance, if you are selecting your very first card, many credit card companies offer student plans that are easy to be approved for. Or watch for simple cards that offer low rates if you don’t plan on paying off every purchase right away.

The Step-By-Step “Fix My Credit” Strategy

Step 1. If you are thinking about fixing your credit with a credit card, the most important thing is to start with one card at a time. Choose the card that best fits your needs.

Step 2. Next, each month use your credit card to make a small purchase. Be sure you have enough cash on hand so you can pay off the purchase amount right away. This shows lenders that you are able to use the card regularly and repay the full amount. Each time you pay, it is like a little gold star on your credit report.

Step 3. Credit card companies want to see steady regular payments. Your credit report history keeps track of the past three years of payments. So don’t max out your card and then pay the full amount at one time. This won’t help. This shows irresponsibility and a lack of financial restraint. Make smaller purchases and regular payments instead.

Step 4. Always keep track of your credit score with annual reports. You want to make sure all of the work you have done has not gone unnoticed. You also want to check to be sure there are no errors on your report as this could prevent you from being approved for the credit you want.

So take advantage of the “Fix My Credit” strategy, if followed correctly and start rebuilding your credit today.

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Originally posted 2009-03-18 06:55:46.

Filed under: Credit Score