Credit card intrest rate
Jun. 9th, 2007 by ShaunThe other day I was out for lunch with a few buddies and we got talking about credit cards and their intrest rates. One friend was bragging about how low his credit card intrest rate was I was explaining to him why I didn’t care if my intrest rate was 6% or 60%.
What Does intrest rate even mean on a credit card?
Basically owning and using a credit card is the same as aquiring a one month loan. You borrow money from either Visa or Mastercard and as long as you pay off the loan in full by the end of the month it is a 100% intrest free loan. If you don’t pay off the balance in full by the end of the month you are charged intrest on whatever the balance is that you owe. In most cases credit card intrest rates are typically around 20% and if your balance is $1000 you would be charged $16.66 for that month.
So this is why i dont care what my credit card intrest rate is:
I never carry a balance and neither should you. If I can’t afford something I don’t buy it. Of course there is going to be those people out there saying “but Shaun what about larger purchases such as vehicles, college and homes?” Those are expensive purchases and they do require some sort of financial planning with a long term loan in mind but a credit card is not the way of doing this.
Whenever I hear people brag about their low intrest rates I am not impressed. Just make sure you pay off your credit card off in full at the end of each month and you will never get into trouble.
Lets take a quick look at how what was to happen if you only payed the minumum balance on your credit card:
If you were to have a $1000 balance on your credit card and you payed the minimum amount which is around $25 every month this would take you around 45 months to pay off and would cost you $1900 in intrest. You are basically paying $2900 for a $1000 loan.
This explains why credit card compaines are so incredibly profitable. Pay off your credit card in FULL.
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March 9th, 2011 at 3:58 am
I still worry about the interest rate though, because, there’s still risk whenever you swipe that card.
-Jean
April 14th, 2011 at 7:03 am
well post.You did a fantastic work,and offer much effective imformation for us!Thank you!please
September 19th, 2011 at 11:21 pm
So this is why i dont care what my credit card intrest rate is:
I never carry a balance and neither should you. If I can’t afford something I don’t buy it. Of course there is going to be those people out there saying “but Shaun what about larger purchases such as vehicles, college and homes?” Those are expensive purchases and they do require some sort of financial planning with a long term loan in mind but a credit card is not the way of doing this.