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Interest Rate |
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Interest is the amount of money you pay to use the money that's outstanding on your credit card balance. Some people call the interest rate "the cost of money." Expressed as a percentage, your credit card interest rate is typically variable and is tied to the Prime Interest Rate or some other index. In addition, the interest rate you pay may be determined, in part, by your outstanding balance and your credit score.
Here are the most commonly encountered interest rates terms:
Annual Percentage Rate (APR)
This is the stated interest rate that you are being charged per year on your outstanding credit card balance.
Prime Interest Rate
This is the rate that banks use when lending money to each other. The "Prime" often forms the base that is used to start the process of determining a credit card's APR.
Fixed Interest Rate
This is a stated interest rate that will not change during the contract period.
Variable Interest Rate
An interest rate that goes up and down based upon some financial index such as the Prime Rate, T-Bill Rate or LIBOR.
Teaser Interest Rate
A special introductory rate that lenders use to entice you to accept their credit card. The rate typically switches to a variable interest rate after the introductory period expires.
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Credit Card Definitions > F - M > Interest Rate
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