One of the main worrying factors for credit card users is the interest rate. And many people think that interest ‘eats them alive’ and that is why they prefer not to have any plastic. The truth is that, there are different reasons and each card has a particular rate that depends on the profile of the user.

So why does interest rate on card change?

First of all, the change is not for no reason. It all depends on what you do with the card. There are three main reasons to it as follows:

1. Type of transaction made

Many people don’t know that the interest rate on the card changes depending on the type of transaction made. E.g. in case of cash withdrawal, the rate will be different and much higher. That is why it is not recommended to use the card for withdrawal purpose.

2. Market conditions

The interest rate can also change when the bank makes certain changes in the terms and conditions, depending on market conditions or their own rules. By law, this modification must be communicated and is normally done through an email, notifying you that, for this new period, the interest rate will change from being “X%” to “Y%”.

So, if you are the one who ignores the bank’s communications, you should stop and start reading such E-mails. Typically the subject line will help you in filtering out junk E-mails.

3. Delayed payment

Finally, if you’re the one who lives on the edge and occasionally carries forward the payment dates, you should know that once you fall into arrears, it’s normal that interest rate charges will be different. This rate applies to days in arrears, and is different from the one you have for your purchases.

These are three reasons why interest rate may change and you should know to manage it well.

Also, do not forget that the new cards are launched often with new options for the users. So it is good to review the alternatives and check if there is a card with better benefits available.