So many people get into credit card debt only to miserably find out the truth the hard way -- all the little details add up. When it comes to credit cards, what you don't know will bury you. And credit card companies are counting on your ignorance. For instance, did you know that in many states, credit card companies can change your terms with only a fifteen day notice? Did you even know that you need to read those little legal slips of papers you get from the company? If you don't, you may be surprised with new credit card terms. What do all the terms mean? The interest rate is usually referred to as the APR, or Annual Percentage Rate. Some cards charge a fixed APR, though the majority of cards charge at a variable rate. Variable rates are based on an index, such as the prime rate, that rises and falls. Your rates could go down, but expect to see them go up. Rates are changed for various reasons. You should start with the lowest rate you can find, but make sure that you read all of the find print. There are often different APRs for purchases, cash advances and balance transfers. Many cards now offer extremely low rates that are simply introductory, or teaser, rates that will drastically go up in a few months. The grace period is the amount of time you have to pay your bill between the purchase of an item and the accrual of interest. The standard grace period is 25 days. This allows you to pay off your card in full each month, avoiding interest charges. Many companies are starting to reduce the length of their grace periods. If you do not have a grace period, you start paying interest on a purchase the minute you purchase it. Some credit card companies charge annual fees on their credit cards. If you regularly carry a balance, a card with an annual fee and low interest rate can be better for you than a card with no fee and a higher interest rate. If you pay off your card each month (like you should), you don't need to pay an annual fee for a lower interest rate you aren't using. Late payment fees can be quite significant. You may think that you will never be late on a payment, but sometimes things happen. Did you know that it isn't simply the due date that matters? Often, your credit card company will require the payment to be in at a certain time, such as 1:00 p.m. Make sure that you allow enough time for your payment to reach the company well before the date and time in your agreement. If you don't, you could pay a large fee and higher interest rates. If you exceed your credit limit, you will not only have to pay the amount you are over, but also the over-the-limit fee. Most credit card companies charge a fee for balance transfers. They will usually charge a percentage of the amount transferred. The fee can be large enough to cancel out the interest savings offered by the card. Double check all fees before you transfer any balances. There may also be high cash advance fees for using your card at an ATM. These charges will often carry a higher interest rate with no grace period. Make sure you understand all the terms of balance transfers and cash advances that apply to your card. Your credit card company has the right to change your APR on you for any reason. They are routinely looking at your credit report. If you miss a payment to any company -- it doesn't have to be them -- they may increase your APR. Make sure that you read and understand all the terms of a credit card before you sign up for one. Review all of your accounts and make sure that you read everything they send you. Don't let the little bits add up to a big problem. |
