Simplifying
Finance

Interest Rates and Credit Cards

January 11, 2022
•
1 min.
Example
If you plan to use this component with Finsweet's Table of Contents attributes, follow these steps:
  1. Remove the current class from the content27_link item as Webflow's native current state will automatically be applied.
  2. To add interactions that automatically expand and collapse sections in the table of contents, select the content27_h-trigger element, add an element trigger, and choose Mouse click (tap).
  3. For the first click, select the custom animation 'Content 28 table of contents [Expand],' and for the second click, select the custom animation 'Content 28 table of contents [Collapse].
  4. In the Trigger Settings, deselect all checkboxes other than Desktop and above. This disables the interaction on tablet and below to prevent scrolling bugs.

If you have a credit card the recent interest rate increases have an affect on your cards and the amount of interest you pay each month.

Credit Card providers determine their APRs off of the Federal Reserves prime rate. Generally when you see a credit card’s APR it will be a range, like 14.79% - 27.79%. This is the Prime Rate, 4.79% - 7.79%, with an extra 10% - 20% the credit card company adds. An increase in the Fed Prime Rate means that the interest you pay for your credit card debt also increases over the course of a month.

From May to July 2022 we found that interest on the Chase Freedom Flex increased it’s APR range from 14.99% - 23.74% to 15.74% - 24.49%.

That .75% interest rate increase makes a $100 credit card purchase more expensive at the end of the month. You would pay $2.04 (24.49%) instead of $1.98 (23.74%). That six cents might not be a big concern right now, but it makes your debt increase faster. This is an example of compound interest that works against your financial health. If you plan to pay off that $100 over a year the difference is $13.32 vs. 13.76. On $1000 dollars over a year its $133.21 vs 137.56. The more you spend, the more your debt is compounding against you.

Increasing interest rates mean very little if you have no credit card debt, but make a very real impact on increasing the amount of debt you do have with a credit card. It’s important to be aware that although compounding interest can work for you, it can also work against you especially on credit card debt.

‍

Disclaimer: Apostrophe Inc newsletters, podcasts, or other forms of media reflect the opinions of only the authors who are associated persons of Apostrophe Inc and do not reflect the views of Apostrophe Inc or any of its subsidiaries or affiliates. They are meant for informational purposes only, and are not intended to serve as a recommendation to buy any mentioned products. They are also not research reports and are not intended to serve as the basis for any investment decision. Apostrophe Inc receives no compensation for any mentioned products. Decisions regarding credit, investments, and savings vary from individual to individual and should not be made without the careful consideration of the individual. Apostrophe Inc does not guarantee any results or outcomes.

‍