Credit Card Tutorials

Credit Card Jargons for Dummies

For most consumers, the fine print on credit cards isn’t examined when the account has been opened. Unfortunately, this fine print can outline the terms and conditions of the card therefore, it is essential that the card holder be aware of the terms which are explained.

Although, those consumers that do read the fine print – are you really able to distinguish between the credit card terms mentioned in the fine print? Use this primer to guide you along the next time you become immersed in the fine print.

Annual Fee

The annual fee on a credit card is a separate entity from the interest charges which accrue as a service charge for credit card usage. There are hundreds of credit cards available that come without the average annual fee of $50.00 – even most rewards cards! When searching for a credit card, remember that the annual fee will be tacked on to your first payment once the account has been opened and usually at the beginning of the year after the account has been established.

Average Daily Balance

The average daily balance is calculated using the total daily balances together and then dividing by the number of days that occurred in the billing period. This will determine the spending habits for a certain customer as well as calculating the interest which is to be charged to the account for that month.

Billing Cycle

The billing cycle of a credit card is calculated using the number of days in the billing period until the closing date of the next cycle.

Credit Rating

Every customer has a credit rating which is used to determine the interest rate and spending limit that the card holder will be offered. Many factors are used to calculate the credit rating including payment history on past accounts, the amount of credit available at the current limits and the amount of time that the consumer has been using credit as well as the types of credit that the consumer has had access to.

Grace Period

The grace period is a limit of ten to twenty days after the purchase has been made in which the consumer can repay the amount which had been purchased on the card without paying interest penalties. Some credit cards have no grace period – when you search for a credit card it is important to find a card that has the longest grace period in order to save the most money.

Interest

The cost to borrow the money from the credit card company to make a purchase is known as interest. With many credit card companies, interest can be avoided by repaying for purchases made within the grace period.

Minimum Monthly Payment

This number is the minimum amount that must be paid each month, in full, on time in order to maintain the good standing of the account. This amount is calculated using the interest rate that you are being charged combined with the balance that is outstanding on the credit card account.

Now you will know what the credit card balance and fine print on your credit card statement is talking about when you receive the copy in the mail. Understanding your statement is an essential step to saving money while using credit.