Understanding the Basics of Credit Card Rates

Understanding the Basics of Credit Card Rates

Do you know that understanding credit card rates can help you save a lot of money? Debt management services explain with a detailed walk through of credit card rates.

Credit card rates

Knowing your credit card rates can actually help you tackle your debt problems in a faster manner. From the daily periodic rate (DPR) to the annual percentage rate (APR), there are many things you may hardly be aware of. Debt management services can help you clearly understand the credit rates.

Check out the promotional rates

Promotional rates, otherwise called as teaser rates, are the introductory offers presented by credit card companies when you opt for any new card. Usually the offer is valid for a specific period of time. Once the time is over, the APR can go up to a higher level as usual. If you use them wisely, these introductory credit offers can help you reduce your debt problems. Experts of debt management services suggest using the promotional rate early within the time period. It will help you save money. However, it's recommended to check how the payments are allocated and the expiration period validity before you opt for a promotional credit card offer.

Monthly interest charge

Agencies offering debt management services calculate monthly interest charges by using DPR, as the number of days varies for different months. Here is how the DPR is calculated:

DPR= APR/365 (number of days in a year)

Monthly interest balance= DPR x balance x number of days in the statement billing cycle

There are two common methods of balance calculation - average daily balance and adjusted balance. Both these methods are subject to interest changes.

Payment segregation on monthly balance

Have you ever wondered where the payment goes if you are not paying your full balance at the end of month? Debt management experts explain it in a simple format. When you pay the minimum monthly payment, it goes toward the lowest interest rate first. But when your payment is more than the minimum balance, the extra amount usually goes to pay off the next higher rate. Hence plan accordingly while paying so that you can reduce the debt considerably.

Here is a tip on credit card rates. If you want to avoid paying interest on purchases, then take advantage of the grace period. But make sure to pay off your balance in full or it might accumulate towards debt problems.

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