Credit card companies will send you a monthly bill, or statement, showing how much you’ve borrowed. This example shows how to save 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 higher interest rate, and one with a lower interest rate.
Save money on interest
|Choices||Interest rate (APR)||Pay within (months)||Total interest||Total price|
|Credit card #1 with a $500 purchase||8%||6||$10.25||$510.25|
|Credit card #2 with a $500 purchase||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? 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.
Note: Annual Percentage Rate (APR) expresses the total cost of credit as a yearly rate, taking into account a loan’s interest rate, term, and fees. The lower the APR, the lower the total cost of borrowing.
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