According to a 2014 Gallup poll, about half of American credit card users sometimes carry a balance on their cards.1 If you’re one of those millions of users, you’ve almost certainly noticed interest charges on your monthly card statement.

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Do you have questions about how these charges are calculated? Remembering just a few facts about credit card interest will empower you to make the best financial decisions for yourself and your family.

Here’s what you need to know:

A few more important facts to keep in mind:

  • Separate interest rates and charges can apply to cardholder’s cash advance balance and balance transfer balances. Furthermore, many credit cards will impose a higher penalty interest rate when cardholders fail to make payments.
  • Most credit card variable interest rates can change with the Prime Rate. The Prime Rate is an interest rate that is three percentage points above the federal funds rate, which is set by the Federal Reserve Bank. Because this interest rate can increase, cardholders should be careful not to incur more interest charges than they can comfortably pay each month.

Remembering these simple facts about credit card interest will empower you to make the best financial decisions for yourself and your family.

Learn how Credit Card Interest Works in less than 90 seconds

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