Interest Charges and Fees

Get to know your Annual Percentage Rate (APR)
Credit companies charge a fee in exchange for letting you carry balances. These are called Interest Charges. You can avoid a Interest Charge on purchases if you pay your balance in full each month. However, if you pay less than the full balance, a Interest Charge will be added to your account. If you carry a balance from month to month, Interest Charges will add up.

APR is the interest rate, calculated on a yearly basis, which you pay on balances. If you carry a balance, the APR is the best indicator of what credit costs. The higher the APR, the more you will pay. Some credit card companies offer lower introductory rates for a limited period of time. Afterwards, these rates usually go up. To calculate the rate each month, divide the APR by 12. For example, if the APR is 18%, the monthly interest rate on carrying a balance is 1.5%.

Your APR may be tied to a specific rate of interest, such as the Prime Rate. This means your interest rate is "variable"—it could go up or down over time. A non-variable APR doesn't change the way a variable does. However, with advance notice from the card company or if you default on your payments, non-variable rates may still change at some point as permitted by law.

Your rate may also change as described in your Card Agreement or upon written notice from the company.

Where do interest charges come from?
Interest Charges are calculated in different ways. Your account statement describes the method that applies to you. In general, your balance for Interest Charges is based on one of these methods:



Other costs of credit
There are other fees and expenses associated with using credit cards. The more you know about these costs, the better you can control your expenses.



Manage your accounts with free tools
Fees such as late and over-the-limit fees are avoidable. They may also harm your credit history, which could make it harder for you to get credit in the future. To help manage your credit card accounts, ask you credit card issuer if they offer the following tools: