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Interest is the amount of money you pay to use the
money that's outstanding on your
credit card balance. Some people call the
interest rate "the cost of money." Expressed
as a percentage, your credit card interest rate is
typically variable and is tied to the Prime
Interest Rate or some other
index. In addition, the interest rate you pay
may be determined, in part, by your outstanding
balance and your
credit score.
Here are the most commonly encountered
interest rates terms:
Annual Percentage Rate (APR)
This is the stated interest rate that you are
being charged per year on your outstanding credit
card balance.
Prime Interest Rate
This is the rate that banks use when lending money
to each other. The "Prime" often forms the base
that is used to start the process of determining a
credit card's
APR.
Fixed Interest Rate
This is a stated interest rate that will not
change during the contract period.
Variable Interest Rate
An interest rate that goes up and down based upon
some financial index such as the Prime Rate,
T-Bill Rate or LIBOR.
Teaser Interest Rate
A special introductory rate that lenders use to
entice you to accept their credit card. The rate
typically switches to a variable interest rate
after the introductory period expires. |
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