Credit Card Interest

Current statistics show the average America household to carry more than $16,000 in credit card debt. The average annual percentage rate on these cards is around 14.31 percent. More than 11% of people will fall into trouble with credit card debt and default on their accounts. The minumum payments on credit cards often consist of only 1% principle, with the rest being the monthly interest that was accumulated. Interest rates are the main way that credit card companies earn revenue. However, they are also the main reason some consumers find themselves in trouble.

Using credit cards responsibly means understanding the big picture where interest is concerned. After all, interest amounts can seem very ambiguous for those who don't understand how they work or those who are not able to calculate the math. In efforts to reform the way consumers view credit debt, the Credit Card Accountability, Responsibility, and Disclosure Act now requires card companies to provide extra information on your monthly statement. Statments not only have to tell you what you pay in interest for the month, but must also include how much interest you will pay over a period of time, if you only pay the minumum balance each month. This information clearly stated is quite shocking for many people who didn't realize the major expense associate with their credit card debt.

Credit card interest charges can apply to the average daily charges of your card, the adjusted balance at the end of your billing cycle, or the previous balance. Rates vary greatly from one issuer to the next. However, many cards start with an introductory offer that is often 5% or lower. Then, they can spike up to 29% or more after the first year. In addition, credit card companies are able to increase rates without warning on accounts with serious delinquencies. When you are losing money from paying montly interest on your card, it can make it difficult to experience any kind of financial growth or even to keep up on the minimum monthly payments. Before signing up for any line of credit, consider the actual cost of using that card.