Choosing the right card for you

This example shows how to save money on interest.

Let’s say you purchased a new laptop for $500 with a credit card. Review this chart to see what you’ll really pay when using a credit card with a lower interest rate, and one with a higher interest rate.

Compare a $500 purchase on 2 cards with interest rates

Credit card options Interest rate (APR) Pay within (months) Total interest Total price
Credit Card A 8% 6 $10.25 $510.25
Credit Card B 18% 24 $99.09 $599.09

It definitely pays to get a credit card with a low interest rate, and to pay off your bill as quickly as you can. Why? Each month, the credit card company will send you a bill, or statement, showing the amount you’ve borrowed. If you pay off purchases by paying your first credit card statement in full, you’ll pay no interest, plus you’ll have your full credit limit available to use again; but if you decide to repay over time, you’ll be charged interest on the unpaid balance each month (the amount you still owe). With interest, the total amount you end up spending on things may be quite a bit higher!

That’s why it’s always a good idea to shop around for the credit card with the lowest interest rate you can find. Compare the two examples below. In both cases, customers used a credit card to purchase a TV with a $500 price tag. But see how the difference in the interest rate and how quickly they repaid affected the total amount of interest each customer paid.

When comparing credit cards, look at the Annual percentage rate (APR). APR is a measurement that takes into account a loan’s interest rate, term, and fees to illustrate the total cost of credit expressed as a yearly rate. The lower the APR, the lower the total cost of borrowing.

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