Credit Card FAQ

What Is the Highest Credit Card Interest Rate Allowed by Law?

23 October 2010 by CreditCardsCo™

When you are looking to have credit extended to you, questions like, "What is the highest credit card interest rate allowed by law" may start to come to your mind. You may be surprised when you start thinking of questions like this that you don't already know the answers to a lot of questions about credit cards.

It's true, a lot of people aren't aware of many of the intricate details and laws about credit. The banks make getting the loan seem easy (except for all the paperwork) and they don't go out of their way to make sure we understand what we're really getting ourselves into.

Start Asking Questions

Many people make assumptions and don't even realize what they don't know. But, the question often arises quickly when the interest rates you are being offered seem unfair and even ridiculous. If you try to do a quick search to find out the answer to the question of what is the highest credit card interest rate allowed by law, you may be surprised that you can't seem to find a straight answer.

The truth is, the highest credit card APR allowed by law changes based on what state you are in. You'll need to do a bit of research to find the governed laws in your state about maximum interest rates. Once you've determined that, you need to start asking some questions of your financial institution about the rate they're offering you.

Good things to know are, can the rate ever increase? If so, what can happen that would cause that? Is the rate an introductory rate? Is your interest rate ever subject to hitting the highest interest rate allowed by law? You'll be surprised to find out that many of the rates we're offered are introductory and subject to timely payments. As soon as you are late on one payment, that nice low interest rate you once enjoyed will grow fangs and claws and turn into one of the ugliest rates you've ever seen.

Read The Fine Print

While you're asking questions from your bank and determining what is the highest credit card APR allowed in your state, you'll need to make sure you understand just how interest rates work in determining your minimum payment. If you have a 5% interest rate and charge a $20 tie at your favorite store, it stands to reason that your monthly payment would be $1 (5% of $20) every month, right? Wrong. In addition to having an interest rate, banks also have a minimum amount required every month. You'll have to read the fine print to figure out what it is, but they'll say you'll either pay the percentage offered, or a certain dollar amount depending on which is more.

Additionally, you'll need to know whether the interest rate you've been offered is a fixed or variable rate. A fixed rate will stay the same no matter what changes in the market. A variable rate is subject to change with the rising and falling of the prime interest rate. Most credit card rates are variable. Some offer a fixed introductory period, but then your rate becomes variable. Many people don't realize this because they're so used to just making the payment the bank asks for every month. Knowing this information might change the way you use your card.

The bottom line is, do your homework. Don't take credit so lightly. Do some research on different credit card companies and determine which one has rates and terms that you can live with. There are many laws in place that help to regulate credit card companies to stop the consumer from being gouged, but do some research to find out how they affect you. The first thing you should do is find out what is the highest APR on credit cards allowed by law in your state.

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