The Basic Terms of Credit Cards
Credit card offers are typically filled with a lot of jargon, so much so that sometimes it’s even difficult to tell if a credit card offer is good or not, simply because the terminology is too confusing. To make an informed choice on which credit card offer is best for you, you should at least know these terms:
APR – Annual Percentage Rate (APR) is the rate which will be heaped onto you bill should you exceed your grace period. APR is the bane of the undisciplined credit card user, and the penalties are quite stiff, particularly for cash advances. APRs may be variable or fixed. Typically, a fixed APR is better as it is more predictable; however, fixed APRs are almost always set high.
Credit Limit- This is the maximum amount you can charge to your card within a given period. In cases where exceeding the limit is allowed, there are hefty over the limit fees charged.
Balance- This is all the money owed to the credit card company at any given time, inclusive of actually purchases, credit card finance charges, fees, penalties etc. The disciplined credit card holder keeps this figure lower than the credit limit.
Finance Charge- Calculated based on the APR and the balance, this what credit card companies charge for the privilege of having a revolving balance.
Grace period- The amount of time you are granted within which to settle your balance, without incurring penalties.
You’ll want to understand these terms intimately before you commit to a credit card. Only then can you get a great deal on a credit card.
Comments are currently closed.