Credit Card Rates for Bad Credit

Credit cards offer a grace period, usually a 25 day window where you can pay off your purchases before they begin to accumulate interest. While everyone should make an effort to pay off their purchases during the grace period a credit card company offers it does not always work out that way. This is why it is important to use credit cards with the lowest APR you can find. If you have bad credit you can expect to pay a much higher APR, or interest rate, than everyone else, but how high will the rate be on average and what can you do about it?

If you have bad credit you can expect to pay an APR of 23.95%! Credit card rates for people with bad credit are nearly double the average APR of a credit card which stands at 14.6% and it is more than double the average rate for a low interest card. At nearly 24% interest will eat you alive if you run a balance from month to month, even if it is just a few hundred dollars. If you make purchases with a credit card that has an interest rate anywhere near this high you have to be sure that you pay off your purchases before they begin to accumulate interest, you need to make use of the grace period that almost every credit card offers.

The statistics listed above should show you how important it is to have good credit. A person with average credit will only have to pay 14% APR on average to credit card companies versus the 24% someone with poor credit has to pay. The difference between 14% and 24% is huge when you talk about compound interest. Over a few months the difference between the two interest rates will be nominal, you may notice you will have to pay 10 or 20 dollars more in interest with the higher APR, but after several months and years when you give compound interest enough time to really kick in the difference between having okay credit and poor credit will be huge, potentially thousands and thousands of dollars.

Now that we know how important it is to have good credit with regards to getting a better APR on your credit card, what steps should you take when it comes to handling your credit card to raise your credit score? First off you need to realize that using your credit card to make purchases does not hurt your score whatsoever. In fact, routinely making purchases on credit and paying them off in full in a timely manner will do nothing but raise your credit score significantly. You have to make sure that you pay off your purchases quickly, preferably within the grace period your credit card offers so your purchases do not have any time to accumulate interest. Also it is important not to run monthly balances on your credit card. If you do run monthly balances you need to keep it manageable, no more than 30% of the maximum credit line you are offered. For example, if your credit card has a limit of 2,000 dollars you should not run a balance over 600 dollars. Once your balance goes above 30% of your max your credit score will begin to suffer.

Credit cards are can be a valuable financial tool if they are treated properly. If you have bad credit it is doubly important for you to make payments on your purchases in full before they accumulate interest, this will help you save money and improve your credit score at the same time – remember, credit card rates for bad credit are nearly double the average APR. You may be in a poor financial situation today, but with a little planning, discipline and foresight the future will only be better.