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Credit Card Interest Rate Secrets Exposed

Credit card issuers love to shine the spotlight on their 0% APR introductory offers. They know the numbers better than anyone. One of those numbers that I speak of is the fact that the average American household now holds $9200 in credit card debt. The low APR and 0% APR credit card offers target those people as enticements to transfer their high interest rate balances while simultaneously consolidating their credit card debt. These cards have become incredibly popular in recent years.

Transferring high interest credit card balances to a card with a zero percent APR is obviously going to save you money. But what the credit card companies don’t say a whole lot about is what happens to your rates when the introductory period expires in 6 to 12 months. That is when the “go to rate” kicks in. The go to rate is based on the Prime Lending Rate and it is a variable rate. The Prime Lending Rate is set by the Federal Reserve and dictates the best rates that the banks can borrow money from the Fed.

The go to rate is also dependant upon the credit rating of the customer. Those with the best credit report histories will be rewarded with the lowest rates. This is due to the fact that they have shown themselves to be responsible borrowers and are therefore a lower credit risk. In recent years the variable interest rates offered by credit card issuers have been attractive for consumers because of the overall favorable interest rate climate.

What many people do not realize though, is the fact that credit card companies place what they refer to as a “floor rate” on their offers. This is buried in the fine print (that we never read) listed under the terms and conditions on the credit card application. The floor rate protects the profit margins of the credit card companies by not allowing the variable rates that they charge to fall under a certain level. Of course, when interest rates begin to rise, the banks and credit issuers won’t miss a beat charging you a higher rate.

The alternative to variable rate credit cards are fixed rate credit cards. There are several fixed rate credit cards on the market but not nearly as many as variable rates. The attraction of a fixed rate card is that upon expiration of the introductory period, the rates charged will be “fixed” at a predetermined number such as 9.97%. It sounds like a pretty good deal and it usually is, but here is a little known fact, the credit card company can still raise your rate at will. All they need to do is supply you with a 30 day written notice that they intend to raise your rates.

As the old saying goes, “the devil is in the details”. In the case of credit card offers, the details are buried in the fine print of the cardmember agreement. So what is your best option when choosing a credit card offer? Well, my advice is that if you are transferring a balance, take advantage of a 6 to 12 month balance transfer introductory offer. Use the introductory period to pay off the principal in full and interest rates will become a moot point for you because you won’t owe anyone a dime.

Related Information:

  1. Deadbeats, Revolvers and Rate Surfers – Credit Card Secrets Exposed A video that shows cardholders exactly what the credit card issuers think of them….
  2. Discover The Lowest Interest Rate Credit Card If you truly are trying to find the lowest interest rate credit card then begin your search here so you’ll know exactly what to look for….
  3. How to Deal with Sudden Credit Card Interest Rate Increases If you are one of the millions of Americans who have recently seen your credit card interest rates increase sharply then you can at least take comfort in the fact…
  4. Credit Card Interest Rate Increases to Be Looked at by Regulators The feds are now taking a look at how credit card issuers are aggressively raising interest rates on existing balances….