How Does Interest Work on Credit Cards?

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Interest – it’s not always as easy to understand as you would think.

Compound interest, annual percentage rates… different financial products can charge interest in different ways and you would be forgiven for being a little confused by it all.

This infographic from the HSBC Credit Cards team takes a look at how interest works regarding credit cards.

The infographic gives a basic description of what APR is (the most common type of interest charged on credit cards), and goes on to describe interest more broadly, giving some real life examples you can use to sharpen your understanding further.

Banks will typically check a potential customer’s credit score before offering a credit card and use this information when accepting you or making a quote – so you should bear this in mind when you see a credit rate offered – this is not guaranteed to be the rate you will get.

Credit cards in some situations are not always the best ways of borrowing money, so you should always shop around for the best deal and consider speaking with a financial expert.

However some credit card deals, especially those that offer an interest free or low interest period on balance transfers for new customers can actually offer a good alternative to loans or other financial products such as personal loans.

View the infographic in full below:

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