Everyone is looking for the best deal in these days of a depressed economy and high unemployment. Every dollar needs to be stretched further, and this extends to getting the best credit card rates as well. As many families and individuals look to credit cards to make end meet, getting the best credit card rate possible is an important factor in household finances.
But what is a good credit card rate? A good rate would be one that is equal to or lower than the average credit card rate in the U.S. Explore credit card interest rates now by using the FREE credit card finder! Many factors go into qualifying for a good credit card rate. An applicant’s credit history, overall debt, and ability to repay credit card debt can all affect interest rates. In times of financial crisis, using credit cards can be a risky proposition.
Getting a Good Credit Card Rate
Credit card companies first look at an applicant’s credit history to set interest rates for credit cards. They use credit scores to determine each applicant’s payment risk. A high credit score indicates low risk and a low credit score indicates high risk. Lenders want to be assured that they will be repaid, and they will only accept a high-risk applicant if there is an opportunity to make more of a profit.
A low credit score will result in a high credit card interest rate to offset the applicant’s risk.
So a good credit score is needed to get a good credit card interest rate. Credit scores can be improved through paying off old debt, removing incorrect or fraudulent information, and creating a history of good bill payments with multiple forms of credit. Improving credit scores takes some time, so it is important to know what is on your credit report and what your credit scores are if you want a good credit card rate.
The Average Credit Card Rate
Most credit card companies use variable interest rates based on the Prime Rate. A variable rate is one that will change if the Prime Rate changes. The Prime Rate has been steady at 3.25% for the past few years, but this is not the only factor that affects credit card interest rates. While the Prime Rate has remained stable, average credit card interest rates have continued to rise.
The Federal Reserve calculated that the average interest rate for credit cards in the U.S. was 12.36% towards the end of 2011. However, rates have already gone up substantially since then. BankRate.com reported that average rates for early March 2012 were 14.55% for variable rate credit cards and 13.81% for fixed rate cards. Credit card companies and banks have raised interest rates to cover losses through defaulted accounts and losses in other sectors, such as the housing market.
The Best Credit Card Rates
While most Americans are paying around $15 for every $100 borrowed on a credit card, there are lower credit card interest rates out there. However, those low rates are reserved for those consumers with excellent credit scores above 750 and into the 800s. Visa, MasterCard and Discover all offer credit cards that have annual percentage rates, or APRs, between 8.99% and 11.99% for those with excellent credit.
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Many credit card companies also offer low or 0% interest rates as promotional offers on their credit cards. These introductory offers seem like a really good deal, but they are really a good way to get into debt if you are not careful. These teaser rates only last from six to 15 months, and lenders are betting that most people will still have a balance once the introductory period is over. That balance will start generating interest charges as soon as the promotional period has ended. Then the credit card starts to create debt rather than save money, and that can spell disaster for those who are in financial crisis.
However, there is one way to keep a 0% APR on any credit card, but it requires you to really stay on top of your credit card charges and payments. If you pay off your balance in full each month before the bill is due, then the credit card companies cannot charge you interest. This is called the grace period; most credit cards’ grace periods stretch from 21 days to 25 days. Paying off all charges during the grace period will in effect give you a 0% interest rate.
Know which Credit Card Rates You Qualify For
Most credit cards are categorized by the credit score it takes to qualify. While there are no hard and fast rules pertaining to actual number cut-offs for acceptance or denial, most credit scores can be sectioned into categories such as excellent or poor as well. Match your credit score ranking with the appropriate credit cards.
If you know your credit is labeled as good, then you probably shouldn’t apply for credit cards that require excellent credit.
Find credit cards with rates that match your credit scores by using the FREE credit card chaser tool now!
