Five mistakes not to make while using a credit card(2/5)
2.Passing over rate shopping
You should always do a thorough research before getting a credit card. Credit card mistake 101 is passing over APR shopping . APR stands for Annual Payment Rate it is the rate of interest you have to pay on the funds borrowed if you just make the minimum payments . It is basically the cost you pay for someone else’s funds. This includes any fees or additional costs associated with the transaction but does not take compounding into account.
For loans like home loans and personal loans it is calculated yearly unlike for credit cards which is charged daily and a large chunk of people are not aware of it!
To calculate how much interest you will pay each day if you carry a balance you have to divide your APR by 365. The credit card company multiplies the current balance each day with the daily rate.
For example if your APR is 22% then your daily rate would be .06027%. So if you have Rs 10000 as your balance today then your today’s interest charge will be Rs 6.027.
This Rs 6.027 will be added to your account tomorrow and the interest will be charged on Rs10006.027 till you make the payments .
Some of the APRs of credit cards offered by leading banks are shown in the picture below: