Why is it important to know the interest rate on your credit card?

Knowing your credit card’s interest rate is essential because it affects how much you’ll pay in interest charges if you carry an outstanding balance.

Is a lower interest rate beneficial if you don't carry a balance on your credit card?

There is no benefit of a lower interest rate if you don't carry a balance on your credit card.

Is credit card interest monthly?

While credit card interest is denoted as an annual rate (APR), it’s calculated daily and reflects on your credit card statement each month.

Do you pay APR if you pay on time?

You won’t be charged APR if you pay off your entire outstanding balance before the end of the current billing cycle. However, if you pay only the minimum monthly amount, you will be charged interest.

Will you be charged interest if you pay the minimum credit card payment?

Yes, you will be charged interest if you pay the minimum credit card payment. You may avoid paying interest if you pay off your balances in full before the end of each billing cycle.

Why can credit card interest rates go up?

Credit card interest rates may go up when the prime rate increases or cardholders make late/returned payments.

When should you pay your credit card bill to avoid interest?

You should pay your credit card bill in full before the end of the current billing cycle to avoid interest.

How can you lower your credit card interest rates?

You may choose to get a low-interest rate credit card or a balance transfer card to reduce the amount you pay as interest.

Why do credit cards charge interest?

Part of the profits that credit card providers make comes from the interest they charge. Interest also discourages cardholders from carrying balances, which benefits providers.

Are you allowed to decline or approve a credit card application if the interest rate is too high?

If you wish to decline a credit card application because the card’s interest rate is too high, you might be able to do so by contacting the card provider before they make their decision. Once your application is approved, you can get the card provider to cancel your card. However, doing so will impact your credit score. That effect will be minimal if you have an excellent credit score, but it could be more significant if you have average or poor credit.

How Does Credit Card Interest Work?

Name: How Does Credit Card Interest Work?
Item: How Does Credit Card Interest Work?
Author: Rajiv Baniwal

If you don’t pay off your balances in full each month, you’ll start to accrue credit card interest.

ByRajiv Baniwal

Updated: March 21, 2024

Edited byMegan Hull

Reviewed byBrett Holzhauer

Quality Verified

ByRajiv Baniwal

Updated: March 21, 2024

Edited byMegan Hull

Reviewed byBrett Holzhauer

Quality Verified

Advertising & Editorial Disclosure

About Rajiv Baniwal

Rajiv B says he enjoys delving deep into the world of credit cards because it gives him means to guide credit card seekers in the right direction. He’s been doing this for over 15 years and plans to continue well into the future. He also writes about loans, insurance and cryptocurrencies.

sources

Federal Reserve Bank of New York. "Household Debt and Credit Report." Accessed August 20, 2021.
Federal Trade Commission. "Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act)." Accessed August 17, 2021.

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