What makes a credit card worth considering? A credit card can provide benefits if you use it properly. An important point you need to understand before applying for a credit card is the interest rate you must pay. It’s best if you look for detailed information on what the maximum credit card interest rate is allowable by law.
Reasons to Consider Interest Rates
Why should you consider interest rates? Because it will affect your ability to pay the bill. If the credit card issuer you choose stipulates high-interest rates, then you also have to pay more for the bills and the interest rates charged.
Each country usually has different usury laws. In general, there is still no federal law that determines the maximum interest rate on credit card companies. The maximum limit for interest on credit will follow the laws and regulations of the country where the company is headquartered.
If you are part of the Active Guard or the Active Reserve, you will usually get an interest rate cap. Furthermore, there is a special law that contains a policy about providing interest rate limits on covered dependents.
Is There Any Maximum Credit Card Interest Rate Allowable by Law?
The short and clear answer is “no”. However, if you wonder about the long answer, then it’s quite complicated. In 2009, the government decided to sign the CARD Act to protect cardholders. The basic reasons why the government signed the law were high-interest rates, billing statements, credit card penalties, and due dates.
The contents of the law do not clearly state the maximum credit card interest rate. Also, the CARD Act policy focuses more on the transparency of credit card issuing companies in setting interest rates. Besides, the company must mandate an interest rate due date of at least six months to cardholders.
Furthermore, the government also requires credit card issuing companies to provide advance notice of the due date. Credit card holders must receive notification 21 days before the applicable due date. However, if the cardholder’s fees or interest rates increase, the company must provide notification 45 days in advance.
The CARD Act has also made major changes that benefit credit card users. Every time they process a transaction, the credit card issuing company must confirm to the cardholder if the issuer will exceed the credit card limit.
The government’s goal in making this policy is to minimize reports of stalled billing settlements. Additionally, credit card holders can also refrain from making transactions beyond their capacity.
Although the CARD Act does not set a maximum interest rate limit on credit card issuing companies, the policies they make are more profitable for cardholders. The CARD Act, which requires credit card issuers to provide 45 days prior notification, allows cardholders to think about their choices carefully.
Usury Law Limits in the State
Even though there is no maximum credit card interest rate limit allowable by law, some countries have their own usury law provisions. When it comes to the law of usury, you can get dizzy studying it because it’s very complicated. However, some states set their own limits for non-consumers and consumers.
Please have a look at examples of interest rate limits in some states below to make it easier for you to understand this discussion.
- Alaska sets a 10.5% of legal interest rate and a 5% general usury limit that is above the Federal Reserve’s interest rate. General usury applies when you apply for a loan.
- California sets the legal interest rate for consumers at 10% and 5% for non-consumer general usury limits. The percentage of the general usury limit is greater than the interest rate of the Federal Reserve Bank.
- New York sets a relatively lower legal interest rate of around 9%. However, the general limit of usury is very high, reaching 16%.
Pro Tips to Lower Credit Card Interest Rates
There is no policy that determines the maximum credit card interest rate allowable by law, this has made some credit card issuing companies set such high-interest rates. It’s impossible to avoid interest-free credit cards. On the bright side, you can lower interest rates by following the pro tips below:
1. Paying in Full Monthly
Try to always pay off all bills every month. Hence, you don’t have credit card interest debt because the previous month’s balance has been paid off. You will also start a new bill from the transaction the following month.
Make sure you use a credit card wisely and smartly so you don’t struggle to pay monthly bills.
2. Decide on the Right Strategy for Major Payouts
If you are good at determining payment strategies by credit card, then you will get the benefit. You should not use a credit card for major payments if the bill repayment period is very short.
Conversely, you can use a credit card for large payments if the payment period for the bill is quite long. However, just use the credit card according to your ability to pay the bill.
3. Use Savings to Pay Debt
In order to lower credit card interest rates, you can use your savings to pay off debt. That’s why it’s important to always have some money as it will really help in an emergency. This tip is effective for maintaining your financial health so you don’t get stuck in credit card debt.
4. Assess Your Situation
Every potential credit card holder has different conditions. You need to assess your situation if you want to get credit card offers with competitive interest rates. Generally, credit card issuing companies will offer relatively low-interest rates if you have a solid credit score.
Check piles of emails from credit card companies for offers that are more favorable to you. Perhaps many credit card companies prospect you by offering balance transfers at temporarily lowered rates. You can grab this opportunity.
Have You Enlightened with the Maximum Credit Card Interest Rate Allowable by Law Post?
To sum up, there are no definite rules regarding the maximum credit card interest rate allowable by law. However, the state government has signed the CARD Act, which contains regulations that are more in favor of cardholders.
The main consideration you must never miss is comparing the interest rates of some credit card issuing companies. Try to choose a company that offers relatively low legal interest and general usury so it doesn’t burden you with paying bills.