Why is the APR high with credit card offers for people with bad credit?
Financial Institutions are into the business of credit. The achieve profits by the interest that is generated from the credit they give out. APR stands for Annual Percentage Rate; this is the percentage charge a person taking credit pays as interest every year. There are people who are good at paying back their loans, some pay it in regular amounts, and the institution earns a steady amount of interest from customers. There are people who pay back their loans as soon as possible giving very less profit to the financial institutions in terms of interest. Then there are the customers who never pay on time or don’t pay at all, these are risky customers. But the financial institutions are willing to give them credit too as such customers may also have the potential to pay back the loan and pay interest. Such people who are supposed to have bad credit ratings are encouraged by the banks credit card companies to take loans on the conditions that they would have to pay a higher rate of interest This is a mutually beneficial system where the lender has the potential of earning better profit and the customer who is need of credit gets it.
