Q:

Can lower interest make a large difference on a credit card's balance?

A:

Quick Answer

Lower interest rates can make a significant difference to a credit card's monthly balance. Since the interest rate is a percentage, the difference is proportional to the balance on the credit card. The interest rate is less important if there is no monthly balance.

Continue Reading
Can lower interest make a large difference on a credit card's balance?
Credit: Ti_ser iStock / Getty Images Plus Getty Images

Full Answer

The balance, interest rate and repayment period determine how much of a difference the interest rate makes. To minimize interest paid, cardholders should seek a low interest rate and pay off balances as quickly as possible.

When paying off a credit card balance, a certain portion of the payment pays off the interest from the previous period. The remaining payment then pays off the original balance, also known as the principal. If the payment is smaller than or equal to the interest, then the balance continues to grow indefinitely.

Learn more about Credit & Lending
Sources:

Related Questions

Explore