May 17, 2021 07:55 PM
Credit Card interest rates companies offer both credit card and personal loans without any guarantees or collateral. Although the interest rates on these two loans are high, the interest rates on credit cards are much higher than on personal loans. The credit card annual interest rate is likely to be as high as 42 percent. Let’s find out why other interest rates are so high.
Credit cards are one of the easiest ways to get a loan. Therefore, these are very important. Reward points are awarded not only for taking additional funds when needed, but also for rewards. They will also help you to get other loans by improving your credit score. However, it is beneficial to repay the loan on time. So experts say credit card users should be held accountable. The main reason for this is that interest rates are high.
Typically, credit cards have an average annual interest rate (APR) of 21 – 42%. In comparison, personal loans between 11-16 per cent have a lower annual interest rate. There are two major reasons why credit card interest rates are so high. The first is credit card fraud. The second is the features that are a part of this handset.
Credit cards offer recurring credit amounts. This means that lending institutions offer the facility of borrowing up to a certain limit depending on the client’s income. This allows customers to use the money to the limit without giving any advance notice.
The second is that the eligibility criteria for obtaining a credit card are lower compared to other loans. In addition, customers do not know when and how to use the credit limit assigned to them. Similarly, cardholders do not know how often the card will be used, where the money will be spent, how much will be used, and when it will be refunded. The risk is higher due to this unpredictable cause.
Credit Card interest rates issuers get relief from these accidents through the monthly billing cycle. Monthly billing cycle means that the customer has to pay a small amount every month. Card issuers charge a monthly interest instead of an annual interest on the amount to be paid at the same time. This makes the credit card more expensive.