Understanding the ABC's of credit card terminology
Some people may think of credit cards as just "plastic money"
that are there for their every convenience. What most people do
not realize is that if you keep thinking that your credit card
will let you get your way when it comes to "financial freedom",
well think again.
When it comes to dealing with credit card companies, be prepared
to be bombarded with all sorts of "payment schemes", "loyalty
points" and "spending points". It's important not to get
mesmerized by these sugar coated terms because in reality, no
company is willing to shell out big money for big incentives for
their clients without the hindsight of better profits for them.
Always read the fine print before you start committing to
anything, as well as keep in mind that when an offer is too good
to be true - it most probably is.
Here's a quick rundown of the most commonly used credit card
terminologies:
* Grace period - In layman's terms, this is actually the time
allotted for you in between a purchase to the actual time that
you'll have to pay the interest for it. The most common time
given for grace periods is usually from twenty to twenty-five
days from the time that your purchase gets posted on the
creditor. Although grace periods may actually be quite tricky at
times because there are actually instances wherein you're not
given any grace period at all. So you're actually better off to
just pay off your total balance - in full, so that you won't
have to be bothered by increasing interest rates. * Low
introductory interest rate - if you're looking for a good credit
card, then keep an eye out for this kind of offer from credit
card companies, although, there's always a catch when it comes
to these things so watch out. Some credit card companies are
able to waive their high interest rates for up to a year while
some can just have it for one to three months before your debt
starts creeping in. There are so many choices out there, you
don't really have to pick instantaneously. * Annual percentage
rate - Also known as the APR, this is actually the number that
would be referring to the total cost of your debt. Aside from
that, it'll also include all sorts of fees and the compounding
interest of your account. The APR is what you should know how to
use when it comes to properly being able to compare different
credit cards. Always remember that the lower the APR number,
then the better chances that you won't end up with so much debt.
* Transaction fees - there are credit card companies who would
still charge you this fee, especially if you opt to use your
credit card for other transactions like a cash advance or if you
don't pay your dues in time as well as if you keep maxing out
your credit card. Some credit card companies may actually even
charge you a standard flat rate every month even if you didn't
use your credit card at all, so watch out for credit card
companies like that. The kind of transaction fees that credit
card companies may charge you is unfortunately, their sole
perogative, so in case they would be offering you all sorts of
incentives or even freebies, make sure that you know fully what
you're getting yourself into.
Credit card companies in spite of always wanting your good
favor, they are strict on payments. If you don't wise up about
things concerning your credit card, they will bleed you dry. Not
literally of course, but it is always better to spend cash when
you have it instead of credit cards. Always keep track of your
spending, or else before you know, you might end up in the deep
quicksand of credit card debt.