By: Luis Diaz Updated 31 Feb 2022, 14: 31 pm ITS T
An issue that must be taken into account before acquiring a debt through a credit card is the impact that the Annual Percentage Rate (APR) can bring, it will allow the consumer to be clear about how much he will pay in total to the financial entity with which it will acquire the commitment.
The APR is the total cost per year of the funds to be covered during the term of the loan. This contemplates all the additional commissions to the purchases made. Therefore, there will be the application of an interest each month until the debt is paid .
It is common for credit card users to make their monthly payments as they should, but each month the debt grows a little more due to the APR. This means that the payments are less than the assigned interest, so the additional interest is being covered in that month.
With this, the debtor pays a significant part of that capital to the lender before settling the commitment in full. Therefore, the larger the debt and the longer the term, the more money you will have to
“A high APR leads to larger accrued interest charges. If there are high interest rates, it will be difficult to get out of debt. With minimum payments, you may only pay a few dollars at a time, depending on the APR,” a Consolidated Credit report noted.
Consumers should keep in mind that the Rate The Annual Percentage Rate is set from the value of the reference interest rate of the Federal Reserve (Fed) at the time a person opens an account. The current reference rate is between 0% to 0.25%.
It is recommended that those who plan to process a credit card in the financial institution of their choice ask for it with a low APR, since when the Reserve lowers interest rates, it minimizes interest charges. Changes in circumstances can modify your rates.
But when the Fed raises rates, interest will go up. In the next few weeks, possibly on 15 or 16 in March, the Federal Reserve will increase interest rates, which will inevitably impact the payments that the debtor will have to make. Rates are expected to rise at least four times this year.
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