Final answer:
The huge finance charges on Chandra's credit card bill are likely due to the expiration of the card's 0% introductory rate, which has reverted to the card's standard APR. The APR applies to any carried balance and is not affected by staying below the credit limit.
Step-by-step explanation:
Given Chandra's situation with her new credit card, the huge finance charges on her bill could imply several things. However, considering that she was careful to stay below her credit limit and chose the card for its 0% introductory rate, it's possible that the introductory rate on the card is no longer in effect. Credit card companies offer introductory rates as an incentive, but these rates are temporary and will revert to the standard annual percentage rate (APR) after the introductory period expires, which could be as short as 6 months to a year. This APR is applicable regardless of whether the credit limit has been reached, contrary to the belief that the APR does not apply because she is under the credit limit.
When considering how to obtain a credit card, one must be aware of the interest rates that apply when carrying a balance from month to month. The typical interest rate for a credit card can range from 12% to 18% per year. It is thus vital for consumers to understand the terms of their credit card agreement to avoid unexpected charges. For instance, Americans pay tens of billions of dollars in interest annually on credit cards in addition to other fees.