Why Credit Cards Have Variable Interest Rates

Most consumers assume that they can do little to change their variable interest rates on their credit cards. Of course, carrying a low balance and paying your monthly bills on time will help you to reduce your overall debt. Now that credit card issuers have tightened up their qualifying criteria, it is difficult for those with good credit ratings to get new lines of credit. You can use comparison guides to find out which credit cards have the best rewards programs as well as the lowest interest rates. In the end, it will be up to the credit card company to accept or decline your application, however, there are things that you can do to increase your chances of being approved.

The first thing that credit card companies look at when processing applications for lines of credit is debt to income ratio. Simply put, this is a calculation that is used to see how much debt you are in versus the amount of income you receive. If you have too many outstanding debts, your application will be disapproved. You can improve your debt to income ratio easily by increasing your monthly payments.

Credit card companies also consider your credit rating when they are determining interest rates. You may be able to get a low introductory rate, but this will only last for a year at best. You minimum monthly payment will increase and your outstanding debts will be calculated using compound interest. Always pay more than the minimum amount so that you are able to avoid having a financial crisis. If you already have a line of credit and your interest rate has suddenly increased, give your credit card company a call. If you have been a long time customer you might be able to persuade the company into lowering your interest rate.

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