Credit Score vs Credit Card Interest Rates: What is the Difference? What We Must Understand?

To understand personal finance in a better way, we must know the various terms and their relationship to each other. Let's understand what a credit score and credit card interest rate is.

Your creditworthiness is represented by a three digit number called a credit score. It relies mainly on data from your credit reports, which monitor your history of borrowing and debt repayment.

The cost of borrowing money is represented by the interest rate on your credit card, which is commonly known as the Annual Percentage Rate (APR). The percentage of your balance that is charged if you don't pay your entire statement amount by the monthly due date.

The key thing to understand is how these two ideas relate to one another, or how your credit score affects the interest rate you are offered.

Since the interest rate you get is largely determined by your credit score, it's essential to understand the connection between these two ideas.

You have total control over the things you do to raise your credit score, like paying bills on time. The interest rate is decided by the lender.

Since a balance will result in higher finance costs due to a high interest rate, it may be considerably harder to pay off debt. A good credit score can help you save money by securing better terms on all types of loans, not just credit cards.

When you understand the distinction between these two, you may make good use of your credit. Having a high credit score allows you to obtain lower interest rates. (Disclaimer: Given the input is on an information basis, please seek professional advice.)