Credit Card Rates FinderFrequently-Asked Questions (FAQ)
What is a credit card?
A credit card is a plastic card about the size of a playing card or an ID card that lets you buy items without needing cash, either with you or in your account at the bank. The money for the purchase is automatically borrowed from the credit card's issuer, and you simply pay them back later, following the terms of their agreement with you.
First appearing in 1959, the credit card quickly became a vital tool of world commerce, allowing people to more safely make purchases around the world in person, by mail, over the telephone, and now on the Internet.
The cards of the biggest credit card associations, Visa-MasterCard and American Express, have become a sort of unofficial worldwide currency, being accepted in almost every country on the planet.
Security methods:
- You sign each new card on the back. When you buy in person, you sign the credit card receipt, and the two signatures are compared to make sure it's really you.
- When buying by mail, telephone or Internet, you give the card's expiration date and the security code on the back. These are automatically compared to the association's records to make sure the card is genuine.
Other Kinds of Payment Cards:
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What is a smart card?
These are usually the same size as credit cards, allowing multi-purpose machines to handle them as well as the others, credit, debit and check cards. Smart cards have a computer chip built in, allowing the card itself to hold a money value that goes down each time you use the card to make a purchase. You can spot a smart card by the fingernail-size patch of gold contacts on the front at left center.
Before use, many smart cards must be charged up with funds you pay using cash or another card, and so are pre-payment cards, not credit cards. But there are now some true credit cards, such as American Express Blue, that incorporate smart card features into an otherwise normal credit card.
Security Method: Smart cards often require no security procedure to use, since they usually hold a small amount of money. Other cards that include smart features will use the security method related to that kind of card.
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What is a debit card?
This credit card look-alike, also called an ATM card, allows you to get cash from your bank account and perform other banking functions at most any Automated Teller Machine (ATM). More and more stores let you use it to make purchases at the checkout counter.
Since your own money is drawn out of your own bank account when the debit card is used, it is not a credit card.
Security Method: Debit cards use a Personal Identification Number, or PIN number for short. After you pass your card through the machine's card slot, it asks you to type or key in your own PIN number. Without the right PIN number, the transaction will not take place.
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What is a check card?
This clever innovation lets you shop at places that accept credit cards, but the money comes from your bank checking account, not from credit. So a check card is not a true credit card. It's basically a debit card that acts like a credit card. These are part of the Visa or MasterCard system.
A further innovation is the debit-check card. It works both as a check card and as a debit card, allowing you to shop at places that take only credit cards, and also to get cash from the nearest ATM.
Security Method: Check card security is handled just like a credit card.
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What is a travel & entertainment card?
These cards include American Express, Diner's Club and Carte Blanche. Travel & Entertainment (T&E) cards require you to pay off all charges in full each month. These are a favorite of business and professional people who like not having to carry cash and are accustomed to being billed within 30 days for purchases.
Not having the option to carry a balance and make payments over time makes these less attractive to most of us, a card we keep for status, for emergencies or when we've maxed out the credit limits of our other cards.
Security Method: Travel & entertainment card security works just like credit cards.
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What is a store charge card?
Sears and JCPenney are among the most popular of these cards, which are currently losing popularity. Several major store chains have switched to co-branded Visa, MasterCard and American Express cards to slash the expense of keeping credit departments of their own. Store charge cards can only be used at a branch of the store that issued them, and a lot of us would rather have cards that work almost everywhere and have a better interest rate anyway.
The short definition of credit is: Buy now, pay later. It's spending someone else's money with the promise that you will pay them back. When a credit card issuer approves your application, they are saying in effect, "Here, you can spend this much of our money so long as you pay it back (along with our fees) in the time and amounts we say."
As a credit card holder, you are a user of credit. You may also be a provider of credit, if you do any of these:
- have a saving account (your money is loaned to the bank)
- have an interest-bearing checking account (ditto)
- own US Savings Bonds (your money is loaned to the government)
- buy other government or corporate bonds or notes (same idea)
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What is a credit limit?
Also called the credit line (or line of credit), the credit limit is the maximum amount of money you can spend using the credit card. The amount you have actually spent (with finance charges and fees added in) is called your balance or principal. The amount of your credit limit still available for you to spend is called available credit.
It works like this: Credit Limit minus Balance equals Available Credit
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What is a finance charge?
Credit cards that allow you to carry a balance will charge you interest each month on that amount. This is the finance charge, which is added to the balance (the total you owe).
Credit card offers are required by law to tell you what the interest rate will be, given as an Annual Percentage Rate (APR) (for example, 9.9%). This rate is then divided by 12 to get the Monthly Periodic Rate. Each month, your balance is multiplied by this number and - Presto - you have your finance charge for that month.
It goes like this: Annual Percentage Rate divided by 12 equals Monthly Periodic Rate
Balance times Monthly Periodic Rate equals Finance Charge
Note: Some credit card offers will give you a low introductory interest rate, possibly even 0%. Of course, this means no finance charges until the introductory period is over.
Important:
- There may be a different (usually higher) rate for cash advances or balance transfers than there is for purchases.
- You will be charged other fees (each about $30) each month you bounce a check, send your payment late, or have spent more than your credit limit allows.
- You can reduce your finance charges a great deal if you send more than your minimum payment as often as you can. The extra will reduce your balance, and the finance charge will be less the following month.
What ways do different cards compute the finance charge?
- Adjusted Balance (favors you): They take the balance from your previous
statement, add new charges, subtract the payment(s) you made, then
multiply this number by the monthly interest rate.
- Average Daily Balance (fairly even): The company tracks your balance
day-by-day, adding charges and subtracting payments as they occur. At the
end of the period, they compute the average of these daily totals, then
multiply this number by the monthly interest rate to find your finance
charge.
- Previous Balance (favors them): They multiply your previous statement's balance by the monthly interest rate to find the new finance charge. This means they're still charging you interest on your balance a whole period after you've paid it down.
What can change my interest rate?
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Down = lower rate & finance charges,
Up = higher rate & finance charges
- Things you can control:
- Down: Ask for it. Tell the card issuer you will switch to a competitor's card if they don't give you a better rate. It's most effective if you've already gotten the other card.
- Down: Go for it. If you don't get the rate you want, go ahead and switch to a credit card with a better rate. Make sure it has a good interest rate for balance transfers.
- Up: Late payments - 3 or more can get your rate bumped sky high.
- Things outside your control:
- Down: Variable rate - Some cards' interest rates change whenever the Prime Rate or some other industry rate changes. So when that rate improves, so does your interest rate.
- Up: Variable rate - While it can work in your favor, it can also work against you. But unless you're the Fed Chairman (as in Alan Greenspan), you probably can't do much about it.
- Up: Issuer change - Credit card companies can transfer your account to another issuer without needing your approval. The new issuer may have a higher rate.
- Up: Hidden clause - Buried deep in the fine print of your agreement is probably a clause that says your issuer can change the interest rate whenever they want.
- Adjusted Balance (favors you): They take the balance from your previous
statement, add new charges, subtract the payment(s) you made, then
multiply this number by the monthly interest rate.
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This bill, sent to the credit card holder each month, tells you:
- What charges you made last month (check these for accuracy)
- The minimum payment you can send the issuer (send more if you can)
- The due date by which your payment must arrive (or be postmarked)
- The amount you paid last month
- How much the finance charge is this time
Payments
How much will my payments be?
Some credit cards, such as American Express, require you to pay off all your charges each month. On the plus side, they usually have no finance charge.
Most cards, including Visa, MasterCard, Discover and Optima, offer revolving credit. This means they let you carry a balance, on which they charge interest (the finance charge), and they require you to make a minimum payment. The minimum payment is usually 5% of your current balance or $10, whichever is more.
How long will it take to pay off my card by always making the minimum payment?
How much will the interest cost?
These can vary greatly, depending on your balance, the interest rate, and the way your finance charge is calculated, but here are two examples that should help:
High-Rate Card: Suppose you charge $1,000 on a 23.99% credit card. The part of your payments due to that $1,000 purchase will start at $51.00 and slowly work its way down to $10. You'll make 77 payments over the next 6 years and 5 months. By then, you'll have paid $573.59 in interest, over half of what the item(s) cost in the first place.
Low-Rate Card: Now suppose you charge that $1,000 on a 9.9% fixed-rate card. Your payment would likewise go up by $50.41 and work down to $10. You'll make 17 fewer payments, finishing in 6 years and paying a slim $176.00 in interest. You save nearly $400!
The key to saving money, for most of us, is to get a credit card with the lowest ongoing rate we can find. 0% introductory rates are great, but sooner or later we won't switch to a new card in time to avoid the following high rate. Click here to see the credit cards with the lowest ongoing rate.
What happens if I pay late?
- Late Fee: All credit cards charge a late fee ($10-30) when any payment is late.
- Bad Credit: All credit cards report you payment track record to various credit reporting agencies, such as Equifax and TRW. Even a few late payments can cause problems when you go to apply for a house or auto loan.
- Punitive Interest Rates: Increasingly, credit card issuers will drastically raise your interest rate (to as high as 23.99%) after a set number of late payments (read the fine print!). Some 'card sharks' lure in applicants with fantastically low rates (0% introductory, in one case), knowing that many, if not most, people will make late payments sooner or later. Then the company can charge the sky-high interest rate for the remaining life of the account.
About Our Lists
Rates & Fees
What cards have the lowest interest rates?
Click here to see all credit cards ranked by interest rate, then by annual fee, then by grace period.
What cards have the lowest introductory rates?
Click here to see all credit cards ranked by introductory rate and introductory period, then by regular interest rate, then by annual fee, then by grace period.
What cards have the lowest annual fees?
Click here to see all credit cards ranked by annual fee, then by interest rate, then by grace period.
Areas Available
What cards are available anywhere in the United States of America?
Click here to see credit cards available nationwide in the US, ranked by interest rate, then by annual fee, then by grace period.
What cards are available only in certain US regions?
Click here to see credit cards that are only available in a certain region of the United States, ranked by interest rate, then by annual fee, then by grace period.
What cards are available only in specific US states?
Click here to see credit cards listed by the US state in which they are available, ranked by interest rate, then by annual fee, then by grace period; or click on any of the states listed below:
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California Connecticut Florida Hawaii Illinois |
Indiana Kansas Montana New Jersey New Mexico |
New York North Carolina Ohio Pennsylvania South Carolina |
Tennessee Texas Washington Wisconsin |
Benefits
What cards offer the most benefits of any kind?
Click here to see credit cards ranked by the total number of benefits they offer together with a list of these benefits, then ranked by interest rate, annual fee and grace period.
What cards offer the most purchase benefits?
Click here to see credit cards ranked by the number of purchase benefits they offer, then by the number of travel benefits offered, and listing these benefits.
What cards offer the most travel benefits?
Click here to see credit cards ranked by the number of travel benefits they offer, then by the number of purchase benefits offered, together with a list of these benefits.
Ease of Use
What cards have the longest grace period?
Click here to see credit cards ranked by length of grace period in days, then by interest rate, then by annual fee.
What cards offer the best customer support hours?
Click here to see credit cards ranked by the number of hours customer support is available, then by interest rate, then by annual fee, then by grace period.
What cards make automated information available by phone or PC (including web pages)?
Click here to see credit cards ranked by the number of automated information options, then by interest rate, annual fee and grace period.
About List Items
Card Types
What is a Visa Card?The Visa credit card, along with MasterCard, is the most widely accepted credit card in the world. The basic class of Visa, also called a Visa Classic Card, usually has a credit limit of US $2,000 or less. Click here to learn more from Visa International.
What is a Visa Gold Card?The Visa Gold card is a Visa card with a higher credit limit, usually between US $2,000 and $10,000. Click here to learn more from Visa International.
What is a Visa Platinum Card?The Visa Platinum card is a new class of Visa card, with the highest credit limit available, generally US $10,000 or more. Click here to learn more from Visa International.
What is a MasterCard?The MasterCard, along with the Visa Card, is the most widely accepted credit card in the world. The basic class of MasterCard, also called Classic MasterCard, usually has a credit limit of US $2,000 or less. Click here to learn more from MasterCard International.
What is a Gold MasterCard?The Gold MasterCard has a higher credit limit than the Classic MasterCard, usually between US $2,000 and $10,000. Click here to learn more from MasterCard International.
What is a Platinum MasterCard?The Platinum MasterCard is a new class of MasterCard, with the highest credit limit available, generally US $10,000 or more. Click here to learn more from MasterCard International.
What is an American Express Card?The American Express Card, nicknamed "The Card," is the most popular of the Travel and Entertainment (T&E) cards. These require you to pay off all charges in full each month. Instead of a monthly interest charge, you pay an annual fee. This card has no set credit limit, but a charge may be denied if the company deems it to be excessive. You can call them to plead your case and they may then grant the denied charge. Click here to learn more from American Express.
What is an American Express Gold Card?This step up from the American Express Card is also a Travel and Entertainment (T&E) card that requires all charges to be paid in full each month. It comes with a higher annual fee. You need a higher income to qualify, so the company will approve more expensive purchases. Click here to learn more from American Express.
What is an American Express Optima card?Optima is American Express's first revolving credit card, which allows you to carry a balance and pay it off over a time rather than in full each month. There is no annual fee, but a monthly interest charge instead. Click here to learn more from American Express.
What is an American Express Blue card?Blue, the newest offering from American Express, is a smart card and a revolving credit card, letting you pay off charges over time instead of all at once. It features a 0% introductory APR, no annual fee and a low ongoing interest rate. Click here to learn more from American Express.
Interest Rate %
What is Interest?
For credit cards, interest is the money you pay to the card's issuer for the privilege of using their money. When you make a purchase with a card, they pay the merchant for it. Then it's up to you to pay the issuer back, with interest. Other cards, such as travel & entertainment cards, smart cards, debit cards and check cards are not true credit cards and do not charge interest.
What is an Interest Rate?
Interest is charged in percent (%) per year. Percent means parts per hundred, i.e. pennies per dollar. So a 9.9% Annual Percentage Rate (APR) would cost you 9.9 cents per dollar of the total amount you owe (the balance), calculated each year (annualy).
But there's another step that ups the cost a bit. The annual rate is divided by 12 to get the periodic rate (Divide 9.9% by 12 months and you get 0.825%, the monthly periodic rate). With compounding, the interest for one month is added to the balance before the interest is calculated again the next month. When you figure this with our 9.9% APR (0.825% monthly), you get an Effective Annual Rate (EAR) of 10.4%!
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What is Fixed Interest?
Fixed interest means that your interest rate stays the same from month to month. If the rate is changed, you'll get a notice from the card's issuer.
What is Variable Interest?
A variable interest rate is based on another rate such as the Prime Rate, the Fed Funds Rate or some other industry rate (for example, your rate might be the Prime Rate plus 5%). Your interest rate changes when that base rate changes, and can move up and down quite a bit over time. It may be smarter in the long run to choose a fixed-rate card.
Introductory Rate %
What is an Introductory Rate?
Many credit card issuers will offer you "for a limited time" a lower interest rate, sometimes as low as 0%, to entice you to apply. Be sure to find out what the rate will jump to after the introductory period is over.
What is an Introductory Period?
If a credit card issuer offers you an introductory interest rate, it is for a set period of time, most often 6 months. Sometimes a specific date will be set, to encourage you to apply sooner.
Annual Fee
What is an Annual Fee?
Many card issuers add a yearly charge, the annual fee, to your account to pay for record keeping, printing, postage, etc., averaging $20 and as high as $107. Other card issuers charge no annual fee, using the interest you pay to cover their costs. Click here to see credit cards with no annual fee.
Grace Period (Days)
What is a Grace Period?
When you buy using a credit card, you may not have to pay interest at all. The grace period is the number of days you have to repay the purchase before you are charged interest. Many cards have 30 day grace periods and all have at least 20 days. Click here to see credit cards with the longest grace period.
Benefits
What are Benefits?
Most credit cards come with at least some added bonuses, benefits, to help win you over as a customer. Some cards have an amazing array of these benefits, which fall roughly into three categories: Purchase benefits, Travel benefits and Other benefits. Click here to see which credit cards offer the most benefits of any kind.
What are Purchase Benefits?
Below is a description of the various purchase benefits offered. Click here to see which cards offer the most purchase benefits.
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Cash Back - Up to 5% of your purchase's prices will be refunded to you (when bought
using this card).
Extended Warranty - The card issuer will automatically lengthen, often by a year or more, the time in which a new item which is found defective will be replaced free of charge (for items bought with this card only).
Purchase Protection - Items (bought with this card) which are stolen or accidentally broken will be replaced free.
Other Purchase Benefits - Return a purchase (made with this card), etc.
What are Travel Benefits?
Following is a list that describes the most commonly offered travel benefits. Click here to see what cards give you the most travel benefits.
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Travel Discounts - Hotels and rental car prices are lower at participating outlets.
Travel Insurance - Receive free Accidental Death and Dismemberment coverage (when you pay with this card).
Rental Car Insurance - Get free Auto Rental Loss and Damage coverage (when you pay with this card).
Airline Mileage Plans - Charges made on this card grant you free miles in an Airline Mileage Plan toward a free plane ticket, usually at a 1-mile-per-dollar rate.
Other Travel Benefits - Emergency card replacement, ATM cash advance, global customer assistance, etc.
What are Other Benefits?
Some benefits worthy of mention don't fit well in the other two categories:
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Fraud Protection - With these cards, you won't have to pay for charges you didn't
make.
Compromised Replacement - For this card, if your number is used fraudulently, a new card will be automatically issued and the old number cancelled to prevent further abuses.