It’s not so simple. A rate is not a rate is not a rate.
There are fees, both annual and sometimes “just ‘cuz.” And there are all kinds of other potential liabilities that accrue when you flash the plastic in the wrong way.
But first consider the basics – “the cost of renting money.”
Obviously, you want the interest rate to be as low as possible so you pay less to borrow money, and the bank wants it to be as high as possible to make the most money they can. You meet somewhere in the middle depending on several different things. The main things comprise:
• What kind of loan it is
o Credit cards
o Car loans
o Student loans
• The creditworthiness of the person getting the loan. For credit cards, someone with good credit gets a rate that’s 4-ish% lower than someone with mediocre credit.
• Does your mom have a good history about paying her bills on time? Can the bank trust her promise to pay? The better her history, more or less, the lower the interest rate.
• Does your mom make enough money each year to afford the payments she has on all the money she owes? The better able she is to afford the payments, more or less, the lower the interest rate is.