Credit cards can provide value and rewards, but being unaware of card rates and fees can hamper your ability to maximize what your card offers.

Frequently Asked Questions

  • Are credit card interest rates capped?

    Yes, credit cards have an interest rate cap, which is a number that reflects the highest your interest rate can go. This is an important figure to know since most credit cards have a “variable rate” that changes over time. You’ll find your interest rate cap in your credit card agreement.

  • When is credit card interest charged?

    In general, credit card issuers will charge you interest when you don’t pay off your balance by your bill’s due date. The interest you pay is based on your annual percentage rate (APR), which calculates what you owe based on the average daily interest accrued by your unpaid balance.

  • Why did my APR increase?

    Depending on the card you have, your rate can go up for multiple reasons. Three of the most common reasons are that your card’s variable rate increased, you have a penalty APR resulting from a late payment, or your introductory rate ended and your regular APR is in effect.

  • What happens when I make a late payment?

    The immediate consequence of a late payment is that your card issuer will likely charge you the late fee that’s listed in your credit card agreement. If you pay your bill more than 30 days late, your issuer may report your late payment to credit bureaus, a move that could lower your credit score. If you are more than 60 days late, your issuer could raise your APR.

  • How can I avoid interest payments?

     Yes. If you pay off your entire credit card balance every month, you won’t pay interest. You can ensure this happens each month by setting up your card’s autopay feature and selecting the option to pay off your statement balance. Make sure you’ve budgeted enough money such that you’ll have the funds to cover the payment.

Key Terms

Man using calculator at home table to figure average daily balance finance charges
What Is the Average Daily Balance
Working at home
Here's How To Calculate Your Own Credit Card Finance Charge
Young woman paying cashier in clothing store
Credit Card Interest Rates: Fixed Rate vs. Variable Rate
Person holding a credit card
Daily Balance Method for Calculating Finance Charges
person with striped long-sleeved shirt holding a credit card
Average Credit Card Interest Rate Is 20.66%
A customer pays for a coffee with a credit card.
What Are Credit Card Convenience Fees?
A man and his dog look at a phone.
Considering Card With a Promo Rate? This Is What You Can Expect
stack of credit cards
5 Steps to Lower Your Credit Card Interest Rates
A calculator next to piece of paper with a scribble percent sign
What to Know About Credit Card Daily & Monthly Periodic Rates
Young woman abroad shopping online with credit card
Credit Card Foreign Transaction Fee
A woman looks at her computer.
What Effect Does a Variable Interest Rate Have on Your Credit Card?
Stack of envelopes with pen, calculator, glasses and credit card
Late Fees on Credit Cards: How They Work and How High They Can Go
Viewing credit card information on a tablet
What Is a Credit Card Introductory Rate?
Credit cards and statement where the issuer may use adjusted balance method to calculate finance charges.
How Credit Card Issuers Use the Adjusted Balance Method to Figure Fees
A man is paying bills at a computer
Credit Card Over-Limit Fee
Online shopping
Credit Card Companies Earn Profits Even If You Never Pay Interest
Your Credit Card Finance Charges: The Previous Balance Method
Stressed woman paying credit card bills
Here's Why Some Credit Card Penalty APRs Never Go Away
A man stresses about finances
The Six Ways Credit Card Finance Charges are Calculated
A woman looks over her credit card penalty APR terms.
Credit Card Penalty and Default Rates Explained
Upset woman holding credit card
10 Bad Credit Card Habits You Must Break
Hand reaching for stack of cash
The Four Times Banks Can Increase Credit Card Interest Rates
Increasing interest rate
When Credit Card Issuers Must Send Interest Rate Increase Notices
What Is the APR for Your Retail Credit Card?

More in Credit Card Basics: