What is Annual Percentage Rate in Credit Card Terms?
Author: collapsedcat
Posted: Fri Oct 20, 2006 1:33 am
Post subject: Opening a credit card..and some questions
Hi, this will be my first credit card, but before I open one could someone advise me? I'm currently a freshmen enrolling in an university, would it be a good idea to get a Discover Student Credit Card or Bank of America Student Visa? it seems to be that Discover has a lower APR than Bank of America..that which brings me to my next question..what is APR? I know it means Annual Percentage Rate but still I need some clarification.. so what does it mean that if my card has a 16.99% APR?
Thanks!
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Author: artcubed
Posted: Fri Oct 20, 2006 3:59 am
Post subject: What is Annual Percentage Rate in Credit Card Terms?
The APR is the interest that's applied to the balance on the card, unless you pay in full every month. There are a bunch of ways banks calculate this (average daily balance, daily balance, two-cycle balance, and previous balance just to name a few)
The APR can be fixed, or it can be variable (changing, based on some index, commonly the Prime Rate) Fixed is better, because it doesn't go up unless you default on the card agreement. A 16.99% Variable APR would look something like 7.74% + Prime rate (currently 8.25%) So when the prime rate goes up and down, the interest rate on your credit card goes up and down.
If you have a checking account, I would try applying for that bank's student card to establish credit. I've had the most luck getting credit that way. If not...you would probably need to start out with a secured card or a department store card.
I'm also probably oversimplifying the whole process. Feel free to shoot back more questions if I confused you.
More to read:
Establishing credit:
http://www.bankrate.com/brm/news/debt/20021108a.asp
Interest rate calculating:
http://www.bankrate.com/brm/green/cc/basics3-2a.asp?caret=17
Author: cled
Posted: Fri Oct 20, 2006 4:20 pm
Post subject: Re: Opening a credit card..and some questions
collapsedcat wrote:
Hi, this will be my first credit card, but before I open one could someone advise me? I'm currently a freshmen enrolling in an university, would it be a good idea to get a Discover Student Credit Card or Bank of America Student Visa? it seems to be that Discover has a lower APR than Bank of America..that which brings me to my next question..what is APR? I know it means Annual Percentage Rate but still I need some clarification.. so what does it mean that if my card has a 16.99% APR?
Thanks!
When you borrow money from a bank, you have to RETURN that money to the bank and PAY that bank for using their money.
the bank charges you a certain amount for every $100 you borrow from them (hence, the word percent or per hundred)
so, 16.99% APR===> could mean that the bank will charge you $16.99 for every $100 you borrow for ONE (1) year...
sounds a small amount, right?
How about if we try:
$1,000 for a year, we get to pay $169.9
$10,000 for a year, we get to pay $1,699
the above explanation about APR may have been (over)simplified...
in reality and actuality, consumers end up paying more, as they differ in how they pay back the money they owe...
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Author: collapsedcat
Posted: Fri Oct 20, 2006 7:04 pm
Post subject:
artcubed, So if I understood correctly, so for example, if I don't pay for that month they will charge me the interest of the amount of money that a spent for that month? I'm planning on Opening a credit that has a certain reward..because I brought alot of books, and most of the time I go to Fastfood places for lunch, so I though that the Discover Student Credit Card would be a good card for me..should I try to go for that one?
cled, I understand your concept but I just want to be sure, credit card company will charge me the APR for the total of money that I used in a year?
Thanks for replying
author: artcubed
Posted: Fri Oct 20, 2006 11:04 pm
Post subject:
If you don't pay the full amount for that month, then yes, you get charged interest on what you didn't pay off, because you're carrying that balance.
You have to pay something to the card company every month. If you don't pay at all, you risk defaulting and your interest rates skyrocketing.
You can try for the discover card, but you have a high risk of being declined because you have no credit at all (I had this problem not long ago)
No, you don't get charged interest based on the total amount you charged in a year. He's just giving an example of if you charged $1000 right now, and carried that balance for a year (didn't pay it off for 12 months). Again, if you charged $1000 right now, and paid it off the minute you got your statement, you probably won't pay any interest.
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Posted: Fri Oct 20, 2006 1:33 am
Post subject: Opening a credit card..and some questions
Hi, this will be my first credit card, but before I open one could someone advise me? I'm currently a freshmen enrolling in an university, would it be a good idea to get a Discover Student Credit Card or Bank of America Student Visa? it seems to be that Discover has a lower APR than Bank of America..that which brings me to my next question..what is APR? I know it means Annual Percentage Rate but still I need some clarification.. so what does it mean that if my card has a 16.99% APR?
Thanks!
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Author: artcubed
Posted: Fri Oct 20, 2006 3:59 am
Post subject: What is Annual Percentage Rate in Credit Card Terms?
The APR is the interest that's applied to the balance on the card, unless you pay in full every month. There are a bunch of ways banks calculate this (average daily balance, daily balance, two-cycle balance, and previous balance just to name a few)
The APR can be fixed, or it can be variable (changing, based on some index, commonly the Prime Rate) Fixed is better, because it doesn't go up unless you default on the card agreement. A 16.99% Variable APR would look something like 7.74% + Prime rate (currently 8.25%) So when the prime rate goes up and down, the interest rate on your credit card goes up and down.
If you have a checking account, I would try applying for that bank's student card to establish credit. I've had the most luck getting credit that way. If not...you would probably need to start out with a secured card or a department store card.
I'm also probably oversimplifying the whole process. Feel free to shoot back more questions if I confused you.
More to read:
Establishing credit:
http://www.bankrate.com/brm/news/debt/20021108a.asp
Interest rate calculating:
http://www.bankrate.com/brm/green/cc/basics3-2a.asp?caret=17
Author: cled
Posted: Fri Oct 20, 2006 4:20 pm
Post subject: Re: Opening a credit card..and some questions
collapsedcat wrote:
Hi, this will be my first credit card, but before I open one could someone advise me? I'm currently a freshmen enrolling in an university, would it be a good idea to get a Discover Student Credit Card or Bank of America Student Visa? it seems to be that Discover has a lower APR than Bank of America..that which brings me to my next question..what is APR? I know it means Annual Percentage Rate but still I need some clarification.. so what does it mean that if my card has a 16.99% APR?
Thanks!
When you borrow money from a bank, you have to RETURN that money to the bank and PAY that bank for using their money.
the bank charges you a certain amount for every $100 you borrow from them (hence, the word percent or per hundred)
so, 16.99% APR===> could mean that the bank will charge you $16.99 for every $100 you borrow for ONE (1) year...
sounds a small amount, right?
How about if we try:
$1,000 for a year, we get to pay $169.9
$10,000 for a year, we get to pay $1,699
the above explanation about APR may have been (over)simplified...
in reality and actuality, consumers end up paying more, as they differ in how they pay back the money they owe...
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Author: collapsedcat
Posted: Fri Oct 20, 2006 7:04 pm
Post subject:
artcubed, So if I understood correctly, so for example, if I don't pay for that month they will charge me the interest of the amount of money that a spent for that month? I'm planning on Opening a credit that has a certain reward..because I brought alot of books, and most of the time I go to Fastfood places for lunch, so I though that the Discover Student Credit Card would be a good card for me..should I try to go for that one?
cled, I understand your concept but I just want to be sure, credit card company will charge me the APR for the total of money that I used in a year?
Thanks for replying
author: artcubed
Posted: Fri Oct 20, 2006 11:04 pm
Post subject:
If you don't pay the full amount for that month, then yes, you get charged interest on what you didn't pay off, because you're carrying that balance.
You have to pay something to the card company every month. If you don't pay at all, you risk defaulting and your interest rates skyrocketing.
You can try for the discover card, but you have a high risk of being declined because you have no credit at all (I had this problem not long ago)
No, you don't get charged interest based on the total amount you charged in a year. He's just giving an example of if you charged $1000 right now, and carried that balance for a year (didn't pay it off for 12 months). Again, if you charged $1000 right now, and paid it off the minute you got your statement, you probably won't pay any interest.
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
posted by CardRatings.com at 9:23 PM
0 Comments:
Post a Comment
<< Home