When Looking For A Credit Card It Is Important To Understand The Various Terms Related To Credit Cards

Category: Finance, Credit.

When looking for a credit card it is important to understand the various terms related to credit cards. By understanding these terms you can better compare credit card offers and determine which is the better offer.

Below are some of the most common terms you will come across when searching for a credit card. Annual Fee. The fee may range from$ 25 to over a$ 100 depending on the card. Many banks or card issuers may charge a annual membership fee for their credit cards. There are also many cards out there that no have no annual fee! Often referred as the" APR" , this shows how much credit will cost you on a yearly basis.

Annual Percentage Rate. The lower the rate the less you will pay on interest charges. A variable annual percentage rate allows credit card issuers to change your APR based on fluctuations in indexes such as the prime rate. There are two types of APR: Variable APR. Fixed APR. But beware that credit card issuers reserve the right to change the your rate at anytime.

A fixed annual percentage rate is not subject to adjustment based on indexes like the variable rate. Average Daily Balance Method. An average daily balance is determined by adding each day s balance and then dividing that total by the number of days in the billing cycle. This is the most common method that credit card companies use to calculate your payment. Billing Cycle. The billing cycle is typically between 27 to 33 days long.

The number of days between the previous statement date and the current statement date. Credit Line. Under some conditions, your card issuer may increase or decrease your credit line. This is the most you can charge on your account. Finance Charges. Grace Period.

The total charge for using a credit card consisting of interest charges, transaction fees and, late fees other charges. Many credit card companies offer a grace period where no interest is charged. However, if there is no grace period, finance charges will accumulate the moment a purchase is made with the credit card. The typical grace period is usually between 20 and 30 days. Introductory APR. After the initial period the rate will change to the stated interest rate.

Also known as a teaser rate, many credit card companies will offer a low interest rate for an initial period of time to encourage consumers to accept their credit card offer. Periodic Rate. For example, the daily periodic rate is the cost of credit per day. This is the interest rate described in relation to a particular amount of time.

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