A popular way to compare credit cards is to look at their interest rates.

When we talk about a credit card’s interest rate, what we are talking about is how much they will charge you if you fail to pay off your balance in full each month. An interest rate of 15% (common these days) means that you will pay the equivalent of 15% of your unpaid balance on an annual basis.

Quick math: If you have a balance of $2,000 this month but only pay $1,000, you have an unpaid balance of $1,000 subject to interest. The credit card company will charge you $12.50 (that’s $1,000 x 15% divided by 12 months).

But the key thing to remember is this – as long as you pay your credit card balance in full each month, the interest rate does not matter. For more info, click here.

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