|
APR is the annual percentage rate applied by credit card companies to your account when there’s an outstanding unpaid balance after the billing period, when you have overdue accounts, when you transfer balances from another card, or when you take out cash advances. The APR indicates the interest rate as an annual rate like 15% per annum. Multiple APRs
Credit cards apply several levels of APRs. Different APRs for purchases, cash advances, and balance transfers. APRs for cash advances and balance transfers are typically higher than the APR for store purchases like 12% for purchases, 16% for cash advances, and 18% for balance transfers. Tiered or Progressive APRs. Different rates may also apply progressively to different levels of the outstanding balance; say 12% for balances below $500 and 13% for balances above that level. Penalty APR. APR may increase for late payments going beyond a prescribed time period, say if your payment is received after a month from billing date. Introductory APR. This is used as an attraction for new card members and is valid only during a prescribed promotional period; say 6 months from card activation. A higher APR applies after this period. Moving APR. Most card companies have fixed APRs reserve the right to increase APRs as they deem necessary to reflect current money market or lending rates. Some have a variable APR that is a function of some interest rate in the market like the Treasury bill rate or money market rates. The most pernicious aspect of credit card use is when the cardholder only pays the monthly minimum dues indicated on their monthly bills and leaves a balance. Balances carried over to the next billing cycle can exact APRs that balloon as you continuously use the card every month, adding unpaid balances to previous balances. How long is the grace period? It is customary with credit cards for payment to become due 3-4 weeks after statement date. This is termed the grace period and often applies to new purchases made prior to cut-off date, usually a few days before the statement date. This grace period is typically about 25 days and is the period when you can pay the bill without exacting any finance charge. Some cards don’t provide grace periods if you pay only the minimum dues and will have interest charges accrue to your new purchases as soon as they are made on top of the interest charges on your previous balances. Most, if not all, credit cards dispense with the grace period for cash advances and balance transfers. Interest charges accrue on day one of the cash advance or balance transfer.
|
