When you apply for a prestige card, all the different type of interest rates mentioned on the application form probably confuses you.
The most coarse interest rate is the Apr, which prestige card clubs like to quote as the "interest rate" for using their card. This is known as the annual division Rate, which is calculated on a annual basis.
Bank Orchard
However, prestige card clubs do not do their interest rate calculation once a year. They do it on a monthly basis. The interest is applied to your unpaid superior balance is calculated by dividing the Apr by 12. This is called the monthly periodic rate.
Every month, this monthly periodic rate is applied to anything superior balance that is not paid. This is the compounding succeed of interest rate and is refer to as compounding interest. By factoring into the compounding effect, what have is called the efficient annual Rate (Ear). This rate is much higher than the quoted Apr rate.
Most of the prestige card clubs will offer two type of Apr for their cards. The first one is the preliminary rate, which is a very low rate and last for six months to a year. In many cases, the preliminary rate is zero percent. Once the preliminary duration is over, second type of Apr will comes in. This is often called the ongoing Apr, which can be a huge jump from the preliminary interest rate. Thus it is imperative to check the ongoing rate before applying for the prestige card.
In addition, the ongoing Apr can be fixed or variable.
A variable Apr means that the rate will fluctuate according to changes to economic indicators such as the Prime Rate or the Libor Rate.
On the other hand, a fixed rate is not dependent on such economic indicators but it does not mean it stay unchanged over time. The prestige card enterprise can, and will, change it if necessary. However, it will do so after giving you some form of proclamation first. Unless the economy is facing some serious problem, the fixed Apr can stay unchanged for many months.
The all the interest rate stuffs is production your head swim, you just need to do one thing. And that is to pay your prestige card balance in full and on time. If you do this every month, there is assuredly no need to worry about the interest rate.
reputation Card Interest Rates - A brief Explanation