Wednesday, July 18, 2018

Credit Card Basic Terms

Credit Card Basic Terms Explained

In order for you to take responsibility with your finance and spending, you must be familiar with technical terms that you often see, especially in case you want to apply for credit cards.

These are credit card basic terms that are not often explained thoroughly when not asked but are utterly important and must not be taken for granted.

So we have listed and explained below the most common used jargon that you must educate yourself with.

The most important basic terms are listed in alphabetical order:

  • Affinity Card

    These are cards that are often connected to charity organizations. Though the intention of the card is honorable, don’t be sucked into the trend of getting one. Affinity cards often have the highest interest rates among other ones. The intention is great but don’t burden yourself paying for higher interest rate than what you should be paying. So steer away from these types of plastic.

  • APR or Annual Percentage Rate

    This is the amount that tells you the percentage of your balance. Calculated monthly by the bank including the interest rate, will give you the figure to your yearly balance.

  • ATM or Automated Teller Machine

    These are bank or cash machines where you can withdraw or deposit cash from a certain piece of plastic. Some ATM machines may charge a small amount for the transactions but often most machines don’t. Another trick to avoid transaction charges is to use an ATM machine where your plastic is affiliated.

  • Balance Transfer

    Since interest rates differ, some people transfer card balance from a certain one to another. The reason behind is to move a certain debt to a card which has a lower interest rates.

  • Credit Limit

    A credit limit is the maximum amount that your card is allowed for you to use. Usually you are told what your credit limit is and you must avoid spending over the limit. There are certain fees or penalties that will be billed to you if you spend over the maximum capacity of your piece of plastic so avoid that.

  • Fixed Rates

    These are interest rates that are the same rate of your plastic which is the same throughout your card usage but in theory, interest rates changes for variety of reasons. Be sure that you are aware of what your card’s fixed rates are.

  • Grace Period

    These are the given period which are indicated the moment you use the card until you are going to pay for the interest of your purchase. Grace periods varies from one to another. Some allot a month to two months, while some don’t. It will automatically show up in your financial records.

  • Minimum Payment

    These are payments, indicated by a bank, which you are allowed to pay. Some cards usually allow 2% of the overall charge of a certain card while some 5%. Same as the Grace period and fixed rates, minimum payments differ from bank to bank.

  • Sub-Prime

    This is the term used for people who has bad credit but are allowed to be offered loans. Most of people who are ‘marked’ as sub-prime are allowed by banks to be leased money but often uses your property as collateral so they can be secured that you will pay them one way or the other. So beware and take care of your credit as early as possible.

  • Teaser Rate

    First off, really be careful about teaser rates. The reason behind these schemes is to attract as many people as possible to sign up for their card without informing them of the risk. How to spot a teaser rate? Your first clue is reading incredible offer in big letters which can captivate your attention but often includes a fine print in the bottom. Example: Low rate 4.8% in humongous letters but includes For the first (number of months) months, 22.8% after.

  • Variable Rate

    Coming from the term variable, this is the rate that varies in percentage or amount to your base rate. When the rate goes higher, that’s a bad sign, when it is lower that is safe.

With the terms explained to you, you will be somewhat knowledgeable with the credit card basic terms and technicalities. Make sure that you are aware of these technicalities to avoid problems in the future. take good care of your credit as early as possible to avoid limiting yourself to options especially with money.

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