Although credit card issuers earn their revenue from interest rates, fees and charges that they levy on use of their cards, it is the interest rate that accounts for a big percentage of their revenue.
When a bank issues a credit card to you, it establishes a line of credit for you to use and pay later. The bank levies interest on the amount you borrow (the amount that you spend). Failure to pay the amount you borrow by the set due date results in interest charges to your disadvantage.
Although banks or credit card issuers levy interest, the amount of interest each bank charges differs.
Some times the interest a bank charges you also differs from person to person even if you both have the same credit card. For instance, you are most likely to be charged a higher interest rate in cases where you have no credit history or a low credit score. A person with good credit history and positive credit score is most likely to enjoy a low interest rate.
The interest rate that banks charge is the annual percentage rate (APR), which is the rate of interest that you are charged every year. There are two APRs; variable and non-variable annual percentage rate. Both are calculated on the basis of different formulas. Even so, non-variable interest rates at times do change from one year to another depending on transactions. What this means to you, is that your single credit card can have different APRs; one for purchases and the other for balance transfers.
The fact that interest rates can be high should not hinder you from applying for a credit card so long as you have chosen the best card that suits your credit card needs.
You can access low interest credit cards that are now widely available in the market.
Competition among credit card companies and financial institutions for clients has made it possible for some companies and banks to offer credit cards with very minimal interest rates.
Although readily available, it can also be very difficult to qualify for a low interest credit card. This is because most credit card companies limit issuance of the these types of cards to those without particular qualities.
The majority of people who obtain low interest credit cards happen to be those who have shown high level of responsibility on use of credit cards, long credit history, high credit score and a history of prompt payments on their monthly credit card bills.
In addition to the low interest rate, some credit card issuers offer many other benefits such as reward points and priority service when you shop at certain outlets and privileges among other benefits.