Why I Don't Care About the Interest Rate on My Credit Cards
There's a simple reason why the APR on my cards doesn't matter.
- The interest rate on credit cards can vary from one card to another.
- A card charging a higher rate could be much more expensive in some circumstances.
- Since I pay my balance in full, I don't need to worry about interest charges.
When I shop around for most types of debt that I'm taking on, such as a mortgage loan, the key feature I look at is the interest rate I will be charged for borrowing.
But, when I compare different credit card offers to choose the best card to meet my needs, I don't even look at the APR each credit card issuer is charging. And that's despite the fact that the APR can vary dramatically from one card to another.
Here's why the interest rate on credit cards isn't something I compare when I am working on finding the right card for my needs.
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Credit card interest rates don't matter to me for one simple reason
There's a very simple reason why the interest rate on credit cards isn't a criteria that factors into my decision making when I'm considering which credit card accounts to open. It's because I am 100% committed to paying my credit card in full every single month.
The interest rate on a credit card matters a lot in circumstances where you may end up paying interest. That's because there are wide variations in interest rates from one card to another. A higher rate makes the cost of borrowing much more expensive -- and makes it harder to pay down your balance since more money goes to interest instead of principal with each payment you make.
The interest rate also matters if you are getting a card to do a balance transfer in order to help you repay debt. In this case, you'd obviously need the lowest rate possible -- ideally a 0% rate -- to help with the payoff process by reducing the interest you're responsible for paying.
I make sure my credit card bill gets paid in full before the due date
But I don't have any outstanding credit card balances I need to transfer. When I open a credit card, I immediately set up autopay to make my full payment of the entire statement balance before it is due. That way, there's no chance I could end up owing interest, no matter how much I charge on the card.
Because I know there is no way I'll pay finance charges, I'm free to choose a card solely based on what rewards and perks it offers. This wouldn't make sense if I was going to carry a balance since a high interest rate would easily trump the value of any rewards I could potentially earn -- even with the most generous rewards program available. But since I'm confident I'll never have to pay the high rates that some of the best rewards cards typically impose, I can focus solely on maximizing the cash back or points I can earn for the spending I do the most.
Now, if your situation is different and there are some months you don't pay your balance in full, then APR should be the first feature you look at. But, if you budget carefully to ensure you never spend more on your cards than you can pay off before interest kicks in, you don't need to look at the interest rate either when you compare credit card offers to find a card that's an ideal fit.
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