Credit Card Interest Rate?

[Calim]

I've got a checking account right now, with a check (debit) card with the Visa logo on it. However, I'd much rather get a full-fledged credit card (like Amex Blue). I've been looking into it, but, well, I'm confused about something.

What the hell's up with the interest rates? A lot of these cards have no annual fee. That's all well and good, but the companies have to be getting their money *somewhere*. So... how often does the interest accrue? Can I, say, pay my credit card with my check card at the end of the month, on time, and therefore not get charged any interest? Or does the interest compound daily or weekly or something, so that no matter what, I'm going to have to pay *some* interest at some point?

How exactly does the interest work?

Any thoughts, comments, suggestions, etc, that you may have would be appreciated.

Thanks,

-Calim

 

[Murpheeee]

With most cards if you you pay your balance in full every month, there are no interest fees.

If you carry a balance...thats when they screw you.

 

[iamwiz82]

how old are you? do you have credit? if not, expect to pay ungodly high interest rates for awhile.

I'm 19 andhave had 2 credit cards, one is at 18.9% and the other is at 16% I keep getting lower interest rates, which is nice. If i have a really high one, i just cancel it and cut it up, since mine usually dont run a balance(until this month, had to buy furniture!).

 

[kranky]

Most (but not all) cards have a "grace period" where you pay no finance charge if you pay your entire balance in full by the due date. That would only apply to purchases, not cash advances.

If you sometimes pay in full, and sometimes don't, watch for cards that use the "two-cycle average daily balance" method of calculating finance charges. That means they can go back and charge you interest in the previous month even if you paid it in full. All that stuff is in the fine print somewhere.

If you're wondering how they make any money if you always pay in full, it's because on every purchase the credit card company charges the seller a percentage of the amount you charge.

 

[rudder]

those visa debit cards are nice, but just remember you don't always have the same protections as when you use a real visa credit card. There are plenty of cards below 10%. And be very careful about how much debt you accrue. Some people get complacent cause they have a low interest rate card and throw a couple of thousand dollars on it. All well and good, but if you did not read the fine print and you accidently get a late payment in, you could see large fees and intterest that suddenly go through the roof. Credit card companies suck, period! Unfortunately you need them to rent cars or get hotels. Jus tbe careful and read the fine print on the applications AND in the monthly correspondence they send you.

 

[Viper GTS]

So... how often does the interest accrue?

AFAIK, it's monthly based on average daily balance, somebody else can probably answer this.

Can I, say, pay my credit card with my check card at the end of the month, on time, and therefore not get charged any interest?

Yes, if you have a card that has a grace period on purchases. Typically it's roughly a month (30 days).

How exactly does the interest work?

$500 balance, 15% interest.

End of first month, you owe:

500*(1+0.15/12) = $506.25

Month 2: $506.25*1.0125 = $512.58
Month 3: $512.58*1.0125 = $518.99
Month 4: $518.99*1.0125 = $525.47

Etc, etc, etc.

Viper GTS

 

[Calim]

Thank you all very much for your help. I was thinking about getting a full-fledged credit card for precisely the reason you mentioned - added security, especially when buying online - but was worried that I'd have to pay more.

Yes, I plan on paying in full every month. After Fleet decided to screw me over with their "We'll lie about your balance so we can charge you more" policy, I've just had it, and want something better. So I'm switching to Bank of America for my checking and using that to pay off the American Express Blue I plan on getting.

Any additional comments are, as always, welcome.

And thanks again.

-Calim