Factors Affecting Your Credit Card Interest Rate and How to Know If Your Interest Rate Is Too High
Your credit card interest rate is not just an arbitrary number. It depends on a number of different factors and Credit.com breaks them down.
According to the Federal Reserve, the average credit card interest rate is around 12% for all accounts. This is about 13% for accounts with accrued interest. Obviously, your own interest rate depends on your creditworthiness. If you have bad credit, your rate may be even higher.
Generally, the better your credit score, the lower your rate. But Credit.com notes that it also depends on the card – some reward cards offer great benefits, and the trade-off is usually higher interest rates. (Of course, if you’re using rewards responsibly , you don’t need to worry about that.)
What’s more, your interest rate can vary depending on when the Federal Reserve changes the federal funds rate. When the Fed raised rates by 0.25% last year, the standard interest rate for all variable rate credit cards increased by the same amount.
Also, your credit card actually has different interest rates. They explain:
… most credit cards carry several different interest rates. Most people think of the standard interest rate for purchases. But your card may also have different rates for advance payments and balance transfers. It can also have a lower ad funding rate that applies to new accounts for a limited time, and a higher interest rate that can be levied if you missed out on payments.
Finally, we’ve told you how easy it is to get a lower grade – just a phone call is enough. Will not work every time, but it does work quite often, so it’s worth a try. For more details, navigate to their full publication at the link below.
Credit Card Interest Rate Too High? | Credit.com