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Read and Understand the Fine Print

Jun 27, 2008
Knowing the terms and conditions of your credit card is important in order to maintain financial well being. The terms and conditions vary between credit card issuers but this article will contain basic information to help you understand what you are getting into, or have already gotten into.

Nowadays with so many companies reporting our spending habits and credit scores, there are a slew of offers that come in the mail. Unfortunately, because young people are fresh and have no credit, they receive numerous offers as well.

More often than not, they are unaware of what the fine print is and have no idea what they are getting into. There are lots of adults that still aren't aware of how much money they are losing in fees and interest rates.

Part of being a smart consumer is understanding where your money goes and why. The following article will help you understand the details of credit card debt so you can then make smart choices regarding your finances.

Annual Percentage Rate (APR)

The annual percentage rate varies between cards. Many companies will offer introductory offers as low as 0% for a short amount of time. What most people don't know is that can be changed with one late payment or it goes over the limit.

Rates that seem too good to be true don't usually last very long and are typically set at much higher interest rates after the term. When you are late or over the limit most companies will then set your rate at the highest possible.

Grace Period for Purchases

The grace period varies from 20-25 days depending on the company. The finance charge applies after the grace period ends if the balance isn't paid in full.

Annual Fee

Many cards do not charge an annual fee, but it is smart to check if they do before you accept the card.

Minimum Finance Charges

In the event that you carry a balance, which most of us do, you will incur a finance charge. It depends on what the interest rate is and your company's policy, but you may be charged a certain percentage of the outstanding balance.

If you have a small balance, a minimum finance charge will be billed to you instead of the actual interest rate. The minimum finance charge for credit card companies is somewhere between a total of $0.50 to $1.00.

Always investigate your minimum finance charge because it adds up. Read your service agreements for details as well.

Transaction Fee For Cash Advances

You should keep your cash advances to a minimum because several fees can be issued to those transactions, such as teller fees and transaction fees up to 3%. And in some cases, there will be no grace period applied.

Over Limit Fee

If you are over you limit, this can cause headaches as well. Companies can charge you up to $29 every time your card is over the limit and at that point, paying the minimum balance will not work to get you back under your limit.

Try to avoid spending when you are close to your limit. Using all or more of your available credit is viewed negatively by lenders and can hurt you in the long run.

Things to Avoid Regarding Rewards

Some credit cards limit your rewards to a maximum value. Example: You earn points but as soon as you reach a $1000 value that is when you stop qualifying.

Blackout dates are contradictory to your goals regarding rewards. Sometimes you cannot use your rewards during holiday seasons. Make sure you are aware of the blackout dates so you can plan accordingly.

Restrictions are always included with reward programs. You may earn points all year to get a certain reward but then may not be able to carry over to the next year if you don't accrue what you need in the first year. Find out if you have to start over again the following year.

And, stressing the importance of making on time payments, if you are late you will sometimes be disqualified from the entire program.

All of this information should be listed in your Terms and Conditions paperwork.
About the Author
Michael New Jr. is an authority in the financial industry. He has written hundreds of articles relating to consumer services and Prepaid Debit Cards.

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Michael New Jr.
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