Credit Card Guide
What is the Prime Rate?
Credit cards are known to have a number of different rates associated with them. Due to the complexity of these rates in terms of the financial market, many of us do not have the required knowledge to understand and make effective use of such knowledge to our advantage. When anyone goes to apply for a credit card, the only thing that they are mainly known to focus on is the amount of credit limit that they are granted and the interest rate that they will be expected to pay on their purchases. The common mistake that many of us are known to commit is over looking the importance of reading the fine print agreement and just signing the document.
Under the federal law, all credit card companies are required to issue all the complete terms and conditions of the contract that we are signing for and how their expected figures are going to be calculated in the future. Those that have ever looked over the fine print agreement will be able to tell you what a prime rate is. Prime rate is just another word of interest rate payments however there is a significant difference. The prime rate is usually a much lower rate of interest that is given by banks and other lending companies to their more favored customers. Customers being favored more are usually on the basis of them meeting their repayments on a timely basis and them having a stronger credit rating.
Having a prime rate for your credit card transactions usually means that you will end up having to pay much lower amounts in interest in comparison to other credit card holders of similar nature. Due to most interest rates being variable, there are chances that having a variable prime rate could also mean that you are paying more than the desired market rate due to high volatility in the financial markets. All of the details in relation to a prime rate and how they are calculated are known to be found in the terms and conditions of the credit card agreement.
When applying for a credit card, it is important to take your time to choose which lending institution to apply with. There are only a few reputable lending institutions that will be willing to provide a prime rate on your credit card depending on your personal circumstances. Even if you end up finding a credit card where your bank issues you with a lower prime rate in comparison to the traditional interest rate, it is important that you take your time in reading the fine print. More often than not, there are a number of clauses that we over look which in the long run end up costing us even more money than we initially expected.
It is highly recommended that one takes the time to visit a financial advisor to see how and where they can make effective use of being issued a prime rate and whether sacrificing other benefits for it is worthwhile or not. Seeing as they would be more up to date with the market conditions, their advice would be more useful and relevant.
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