Credit cards: the bad boys in the world of interest expense. Though it may not seem like it on the surface, credit cards are loans. You’re being lent the means to buy things in exchange for the promise that you will pay that loan back. Their sky-high interest rate percentages can eat you alive if you don’t pay the balance off completely every month.
How to Easily Compare Interest Rates on Credit Card Offers
It really pays to shop around for any type of credit since
lending rates can vary so much, but this is especially true when it comes to credit cards.
Here’s how to find the best deal when you compare the interest rates of credit card offers.
1. Go to your favorite bank websites and look for their credit card sections.
2. Create a spreadsheet or draw one old-school style with the following eight columns from left to right: Card/Bank Name, Intro APR for Purchases, Intro APR for Balance Transfers, Ongoing Purchase APR, Cash Advance APR, Rebate, Rebate Type and Annual Fee.
3. Populate the spreadsheet with info from your bank websites like so:
Card
Name |
Intro
APR |
Intro APR
for Transfers |
Ongoing
APR |
Cash Advance
APR |
Rebate |
Rebate
Type |
Annual
Fee |
Other
Fees |
| Bank 1 |
0% 6mon. |
0% 12 mon. |
10.99% |
23.99% |
2 miles for $1 |
Air miles |
$39 |
|
| Bank 2 |
None |
None |
None |
None |
1pt for $1 |
Points |
$550 |
|
| Bank 3 |
2.9 6mon |
0% 6 mon. |
10.99% |
23.99% |
Up to 20% |
Cash Back |
None |
|
Annual Percentage Rate (APR) of Credit Cards
APR stands for Annual Percentage Rate, or the portion of your total balance per year you’ll be paying in interest. It’s an expression of the interest rate you’ll pay on an annual basis rather than monthly. In its most simple form Annual Percentage Rate is calculated by taking the rate for one payment period and multiplying by the total number of payment periods in a year.
Now, the Effective APR, or EAR, is a truer measure of the real cost of any loan because it takes into account fees associated with the loan. That’s why you want to consider all of the fees involved as well as the APR when you’re comparing credit card offers.
Also, be careful of the alluring Intro APR. This is beneficial only if you pay off your balance in full each month for the duration of the intro APR. If not, then you’ve built up a balance that you now have to start paying interest on. You’ll definitely get hosed by this if the offer for a low intro rate comes attached with a higher APR that you’ll be stuck with long after the Intro APR is past.
Choosing a Credit Card That's Right for You
Now you can use these tips and compare apples to apples when it comes to
credit card offers. And according to your own priorities and available cash, you can
pick the right credit card for you. The card from bank #2, for instance, has no interest rate for borrowing money, but it has a hefty annual fee and its rebate comes in the form of points towards the purchase of certain products.