Whether you are just trying to maintain your current
credit cards to get new ones, the interest rate on those cards is one
of the most important characteristics that you will consider. You should
also consider that there are some tried and true
standards that will always affect your interest rates no matter what variables
the market throws.
Let’s take a look at your “God-given
rights” when it comes to credit
card interest rates. You should definitely know them before you commit yourself
to any credit card agreement.
Your Credit Score
No matter what kind of credit card you are trying to get, your credit score will be one of the most important factors. This is the first thing that credit card companies look at when they are determining the tier of credit card you will receive. It’s also the last thing a look at before they slap an interest rate on you. The higher your credit score, the lower you can expect your interest rate to be.
Before you apply to any credit card, you should take
every precaution to make sure that your credit report has no mistakes on
it. The three major credit rating agencies are known for making mistakes that
can affect the type of credit card that you receive. When a mistake is made,
those same credit rating agencies actually have no incentive to fix it. It is
up to you to do so, even though the mistake may not be your fault.
Once you go over your credit report, you should schedule your applications
within a short time of each other. Every time that your credit is pulled under
the offices of an application, your credit score is slightly injured. This is
true unless you invoke the rule that gives you the opportunity to apply for
many credit cards at once within a short period
of time. Make sure that you understand this rule and you schedule all of
your applications so that your credit score only gets dinged once.
The Market
Your interest rate also depends a great deal on the base interest rate of the marketplace. Recently, the market has been enjoying record low-interest rates because of the Federal Reserve Think that is associated with the United States. In order to counteract the dual housing and financial crisis of 2008, the Fed introduced 0% base interest rates.
Even though interest rates are not at 0% now, they are lower than they have been in quite some time. This means that the interest rates that banks charge you will be much lower. When the Fed moves their interest rates up, commercial banks move up as well.
Your Personal Finances
Your personal finances will also have a huge effect on
the interest rate that you take on your credit cards. The more leverage that
you have, the more you will be able to negotiate with credit card companies.
Yes, you have the opportunity to negotiate with many credit card companies if
you can afford to wait on the best deal.
Your personal finances will also determine if you have the leverage to get the
most out of the deals the credit card companies offer. Unless you are talking
about straight cash back, many of the deals that you will receive require
waiting on certain features or purchasing things in volume in order to receive
rewards at scale. Unless you can do these things on certain cards, the rewards
are offered will not be worth it. You may actually be better off taking a lower
tier card or simply going for cash back.
The Issuing Bank
Are you familiar with the bank that is issuing the credit card that you are vetting? There is a huge difference in the relationships that some banks have with travel companies, gas companies, and other companies that offer rewards. Usually, bigger banks have better deals with more companies.
However, smaller banks may be able to negotiate some incredible deals with local companies because of their proximity to them. These companies max to be more relevant to you depending on the kind of business that you do or the way that you conduct your personal life.
Your Negotiation Skills
After all of these factors have played out, the rewards that you get from your credit card and the interest rate that you have will depend on your negotiating skills. Although interest rates may seem like a hard and fast rule when you are comparing credit cards, they actually are not. Many banks actually hide their best offers from the general public and wait for the best customers before they actually show what they can really do for people.
In order to get to this hidden tier of rewards and interest rates, you need to know how to get past the watchdogs at the front door. How you do this? First of all, you have a great credit score. Second of all, you do not take the first offer that you receive.
Third, it always helps if you have a personal relationship with the bank that is issuing a credit card that you want. This may actually be the most important aspect of your negotiation. If you have other accounts with the bank, especially big-ticket accounts such as mortgage and car loans, a bank will be much more likely to give you its best deals.
Your Purpose
Why are you getting a credit card, and what is the interest rate that you can actually tolerate? If you plan on holding long balances, then the interest rate will mean a great deal to you. If you plan on paying off the balance every month, then high interest rates really will not affect you. You need to know what you want to credit card for and how you will be using it. This will help immensely in figuring out the interest rate that you will actually end up with.
Consider all of the factors above before you dive headfirst into getting a credit card. If you use these best practices, you will be able to narrow down the credit cards that consider. This will simplify the process of choosing the one that you actually want immensely.
You will not be sidetracked by sales tactics, nor will you be comparing apples to oranges and take a deal that looks good on paper but is actually not good in real life. These are your God-given rights when it comes to credit card interest rates. Take them seriously, and you will have a great financial life for many years to come.
Dana George-Berberich is a freelance reporter and novelist. She has written finance articles for newspapers across the country and for companies like Dun & Bradstreet and Bankrate.
