Understanding Credit Card Interest Rates

If you are unable to pay your credit card bills on time, then with time interest charges will be levied upon you and sooner or later your repayment amount might reach high figures. In the article we will try to understand the credit card debts and the why it is advisable to get out of it.

What Is Interest?
It is expressed in terms of annual percentage rate, it is the fees for borrowing money with your credit card. A credit card gives you the ability to spend the money you don't have. This interest amount is the fees for having that privilege.

Since, credit cards have become an important part of our life, it is important for users to understand the effect of credit card interest on them.

At times of financial crunch it is always tempting to pay only the minimum payment. if you are doing so, you are making a huge mistake. The interest levied on the balance of your card will not only keep compounding every year but also reach a figure that can be more than twice the amount you borrowed. It will take you several years to repay it back. The tip here is to pay at least twice your minimum payment or more if you can afford. It can drastically cut down the time you will take to pay off the balance, which in turn will incur lower interest charges. However, it is best if you don't carry a balance at all. It is because on an average you have to pay an additional 20% in interest amount. So, if you pay on time, you can save that 20% which can be invested else where to earn money.

Many people prefer to invest the money instead of paying their credit card debt. This is foolhardy and will eventually lead to loss of money. On the other hand, if you pay your credit card debt, you can save on the charges the lender can charge you upon non repayment. Once, you have paid off an high-interest debt, you'll not only save money but also save yourself from a lot of trouble.

The bottom line is carrying a balance on hour credit card is simply going to cost you more money. The best thing to do is to pay it off entirely. If you can't then at least try to pay more than the minimum payment requirement. If you have savings else where, use it to clear your debt.