A very important part of the credit card information is about the interest charges charged by the card issuing companies to the customers. Interest rates charged by the issuers of the credit card are not homogeneous but are heterogeneous. Broadly they can be grouped under the following heads :-
- Fixed Rate
- Variable Rate
- Tiered Rate
Fixed Rate credit cards charge monthly interest rates which are fixed but it is not ultimate. It may change after a specified time period (generally 6 months to 1 year). After this period the rate of interest generally shoots up. But the card issuing company is liable to give information to its fixed rate customers prior to the rate change.
Variable Rate credit cards are calculated on the basis of certain indexes. Thus with the change of index rate the credit card rate also changes. Some of these indexes are Federal Reserve discount rate, Prime rates, etc. These rates can be verified by having an watch on the index rates published in the business/money section of any newspaper.
Different rate of interests are applied according to the different levels of outstanding amount in the Tiered Rate of credit cards.
The amount of outstanding balance is calculated in different ways and the balance amount varies from calculation to calculation. This consequently affects the financial charges. The different calculation methods are :-
Average Daily Balance Method (including new purchases) = [Summation of the outstanding balance (which includes new purchases during the specified period but excludes credits and payments)of each day in the billing cycle]/(Number of days in the billing cycle).
Average Daily Balance Method (excluding new purchases) = [Summation of the outstanding balance (which excludes new purchases during the specified period and deducts credits and payments)of each day in the billing cycle]/(Number of days in the billing cycle).
Adjusted Balance Method = (Outstanding balance at the beginning of the billing cycle) – (Credits and payments which are made in the specified period of billing)
Previous Balance Method Here the outstanding amount at the starting point of the billing period of the person is considered.
Credit Card Information, given above, would help the would be card holders in selecting the right card for his right purpose.
Variable Rate credit cards are calculated on the basis of certain indexes. Thus with the change of index rate the credit card rate also changes. Some of these indexes are Federal Reserve discount rate, Prime rates, etc. These rates can be verified by having an watch on the index rates published in the business/money section of any newspaper.
Different rate of interests are applied according to the different levels of outstanding amount in the Tiered Rate of credit cards.
The amount of outstanding balance is calculated in different ways and the balance amount varies from calculation to calculation. This consequently affects the financial charges. The different calculation methods are :-
Average Daily Balance Method (including new purchases) = [Summation of the outstanding balance (which includes new purchases during the specified period but excludes credits and payments)of each day in the billing cycle]/(Number of days in the billing cycle).
Average Daily Balance Method (excluding new purchases) = [Summation of the outstanding balance (which excludes new purchases during the specified period and deducts credits and payments)of each day in the billing cycle]/(Number of days in the billing cycle).
Adjusted Balance Method = (Outstanding balance at the beginning of the billing cycle) – (Credits and payments which are made in the specified period of billing)
Previous Balance Method Here the outstanding amount at the starting point of the billing period of the person is considered.
Credit Card Information, given above, would help the would be card holders in selecting the right card for his right purpose.
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