What Kind of Credit Card Interest Should You Pay?

Wading through all the credit card offers available to you isn't as hard as it used to be -- thanks in large part to the Internet. You now can shop for credit cards online and locate cards with the features you want at competitive interest rates.

As of September 1999, credit card interest rates were averaging about 15 percent, with the lowest rates hovering around 10 percent. If you're paying more than that, you should definitely move to a lower-rate card.

Variable vs. Fixed Interest Rates
Credit cards generally come with either variable or fixed rates. Variable rate cards are tied to the prime lending rate, supplemented with some additional interest percentage (which varies from lender to lender). Each time the federal reserve raises interest rates, so will your bank. If the prime lending rate is low, variable rate cards can be very competitive with fixed rate cards, which offer guaranteed interest rates that don't fluctuate.

Variable rates are different than the "teaser" rates you see advertised all over the place. Teaser rates last for a limited time (usually three to six months), after which your card carries a higher interest rate. Because teaser rates don't last, you shouldn't really consider them in making a decision about credit cards. Unless, of course, you're willing to take the time to change credit cards often enough to take advantage of a string of teaser rates.

Corporate Credit Cards
In addition to consumer credit cards, banks offer business/corporate cards. These feature slightly lower interest rates than average consumer cards. Lenders will look at your business and personal credit repayment history when deciding whether to issue you one of these cards. Some lenders may also decline to issue you one of these cards if you haven't been in business for several years.

Your personal credit history and income also determine what sort of rate you can get on a credit card. Interest rates generally decline as you move from standard to gold to platinum (and now titanium) cards. Access to these cards depends on your credit history and income.

Consider What You're Paying For
You should also consider what you're paying for. Credit cards these days are loaded with perks and incentives of all kinds -- everything from rebates toward car purchases to frequent flier miles. Typically, you can expect higher interest rates and fees on cards that come with these kinds of perks.

While it pays to shop nationally for a credit card, it also makes sense to check out what your local bank has to offer. The interest rate might be slightly higher than what you can find elsewhere, but there's something to be said for the simplicity of keeping all your financial services under one roof.

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