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Credit cards and interest rate details

On Behalf of | Aug 5, 2018 | Credit Card Debt

People in Tennessee who may have struggled with credit card debt know that trying to understand the various terms and conditions associated with these accounts can be very difficult. In fact, for some people, a lack of full understanding about how interest or fees are calculated and assessed may actually contribute to making one’s debt problems worse. Therefore, it is important to be educated about these things to prevent further problems.

As explained by Capital One, any credit card will come with an associated annual percentage rate, or APR. This directly correlates to the amount of interest a person might be charged for use of the card. The APR amount is not the percentage that is charged every month but cumulatively over the course of 12 months. A 36-percent APR means a person will have interest assessed at a rate of three percent per month.

Important to know is that there may be more than one APR on a given credit card account. According to Credit Karma, the basic APR applies to normal purchases made either online or in person with a credit card. Most accounts also allow consumers to take cash advances or to transfer balances from other credit accounts to their cards. Certainly for cash advances, the amount of interest is likely to be higher than per the standard APR. 

There are two ways that interest may be calculated. In one situation, a bank takes an original balance and subtracts any payments made then adds any new purchases. Interest is then assessed on the remaining balance. In the other situation, at the end of a billing cycle, banks calculate the average daily balance by looking at the balance every day of the cycle and then assessing interest.


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