Type of Credit Card:
Many credit card users, beginners and even experienced users, are unaware that there are several types of credit cards.Here are just a few of the most well-known types:
- Standard credit card
- Premium credit card
- Store credit card
- Secured credit card
Your credit limit is the maximum amount you can charge on the card. This includes purchases, balance transfers, cash advances, finance charges, and fees. When you go over your credit limit, your creditor may charge a fee, an over-the-limit fee.
The balance on your credit card at any given time is the total of your purchases, finance charges, and credit card fees. The higher your credit card balance, the lower the available credit you have to make additional purchases, unless you have a charge card or no-limit credit card. Higher balances raise your credit utilization and lower your credit score.
The annual percentage rate (APR) is the interest rate applied a balance carried beyond the grace period. Credit cards can have different APRs for different types of balances, e.g. balance transfers or purchases. Balance transfers and cash advances usually have higher APRs than for purchases.
Your APR may increase when you're late on your payment to a particular creditor, and other creditors if your card agreement includes a universal default clause.
APRs can be fixed or variable. A fixed APR can change, but the creditor must inform you in writing before changing the rate. A variable APR changes from time to time.
The grace period is the amount of time you have to pay your balance in full before a finance charge is applied to your purchase. If you carried a balance from the previous month, you may not have a grace period for your new purchases. In addition, balance transfers and cash advances typically do not have a grace period.
When balances don't have an applicable grace period, interest is applied right away.
To find out the length of the grace period refer to the credit card application or your credit card agreement. Your monthly statements should also include the number of days in the grace period.
The finance charge is the cost of carrying a balance. Finance charges are computed using your balance and APR.
Creditors use different methods for calculating your finance charge. They may consider one or two billing cycles, use an adjusted, average, or previous month's balance, and may include new purchases. The least expensive to you is the average daily balance method excluding new purchases.
In cases where you must pay a finance charge (no grace period applies), your creditor may assess a minimum finance charge. If your calculated finance charge is less than the minimum, you must pay the minimum.
Incentives and Rewards:
Some credit cards offer rewards and incentives for using their credit card. Rewards come in several different forms: cash back, points to redeem, and discounts.Credit Card Rewards
Credit Card Fees:
There are different situations that you might incur credit card fees. Annual fee, finance charge, late fee, and over-the-limit fee are some of the most common fees.Common Credit Card Fees