Credit cards can provide value and rewards, but being unaware of card rates and fees can hamper your ability to maximize what your card offers.
Yes, credit cards have an interest rate cap, which is a number that reflects the highest your interest rate can go. This is an important figure to know since most credit cards have a “variable rate” that changes over time. You’ll find your interest rate cap in your credit card agreement.
In general, credit card issuers will charge you interest when you don’t pay off your balance by your bill’s due date. The interest you pay is based on your annual percentage rate (APR), which calculates what you owe based on the average daily interest accrued by your unpaid balance.
Depending on the card you have, your rate can go up for multiple reasons. Three of the most common reasons are that your card’s variable rate increased, you have a penalty APR resulting from a late payment, or your introductory rate ended and your regular APR is in effect.
The immediate consequence of a late payment is that your card issuer will likely charge you the late fee that’s listed in your credit card agreement. If you pay your bill more than 30 days late, your issuer may report your late payment to credit bureaus, a move that could lower your credit score. If you are more than 60 days late, your issuer could raise your APR.
Yes. If you pay off your entire credit card balance every month, you won’t pay interest. You can ensure this happens each month by setting up your card’s autopay feature and selecting the option to pay off your statement balance. Make sure you’ve budgeted enough money such that you’ll have the funds to cover the payment.
A finance charge is a cost imposed on a consumer for obtaining credit. Finance charges include interest on debt balances and any extra fees imposed by the credit-issuing entity.
Taking out a credit card cash advance is kind of like withdrawing cash from the ATM using your debit card, only with a credit card cash advance, you're borrowing cash from your credit limit and paying a fee plus interest to borrow it.
A credit card foreign transaction fee is a surcharge that cardholders pay on credit card purchases made in a foreign currency or processed by a foreign bank.
A late fee is what you're charged when your credit card payment is received after the due date on your bill, or you've paid less than the minimum amount required. When you have a balance on your credit card, your due date will never be less than 21 days after the end of your billing cycle.
An introductory rate is a low interest rate—often even a 0% rate—that applies for a limited period of time after you open your credit card. Introductory rates are most often given to applicants with good or excellent credit scores, and the annual percentage rate (APR) that applies after the introductory period ends is based on your creditworthiness.
Your credit card comes with a regular APR that's applied to your purchases and balance transfers when you carry a balance or you're not under a grace period. However, just one late payment could result in the issuer applying to your account a penalty APR that’s considerably higher than your regular APR.
Your credit account comes with some stipulations that you have to stick to if you want to keep using your credit card and avoid having your credit affected. The rules of your credit card are outlined in your credit card agreement, a type of contract that outlines the terms, conditions, pricing, and penalties of the credit card.
An annual percentage rate (APR) is the interest rate you pay each year on a loan, credit card, or other line of credit. It’s represented as a percentage of the total balance you have to pay.
A credit card over-limit fee is a penalty charged when you exceed the maximum balance, or limit, on your credit card. This fee is added to the balance that you must repay to your credit card company.
A variable interest rate is an alternative to a fixed interest rate. Variable rates move up and down over time, while fixed rates stay the same. As the interest rate changes, your monthly payment could change due to an increase or decrease in accrued interest.