 By ASAP Credit Card - Copyright © 2008
When
searching for a new credit card, always be sure to factor in the special disclosures
associated with the offer. If you don't understand the credit card's Terms
and Conditions, you could end up making some costly mistakes. Below you'll
find important credit card terms included in all online credit card applications.
You should understand and consider each before you apply:
Credit Card Terms
Annual
Percentage Rate (APR): An APR is the measure of the cost of credit, expressed
as a yearly interest rate. There are two basic types of APR plans - variable and fixed rate plans. The rate, as well as
the type of rate plan must be disclosed before you apply for a credit card.
- A "Variable APR" allows the credit card issuer to change your APR when interest rates
or other economic indicators; called indexes, change. These days, most credit card offers include variable rates. If
you’re considering a variable rate card, the issuer must also provide information
that discloses to you: how the rate is determined, which index is used, and what
additional amount ("margin") is added to determine your new rate. You will also
receive information about how much, and how often your rate may change.
- "Fixed Rate" plans are not subject to
adjustment like variable rates. They remain at the disclosed level indicated upon
opening the account. But be aware: credit card companies often include disclosures
which allow them to change this rate at any time. But they must provide a written
notice at least 15 days prior to the change.
Grace
Period: Also called a "free period," a grace period lets you avoid finance
charges by paying your balance in full before the due date. Knowing whether a
card gives you a grace period is especially important if you plan to pay your
account in full each month. Without a grace period, the card issuer may impose
a finance charge from the date you use your card or from the date each transaction
is posted to your account.
Annual
Fee: Many issuers charge annual membership or participation fees. They
range from $25 to $50, sometimes over $100 for "gold" or "platinum" cards.
* Most credit cards at ASAP Credit Card have No Annual
Fee!
Transaction
Fees and Other Charges: A card may include other costs. Some issuers charge
a fee if you use the card to get a cash advance, make a late payment, or exceed
your credit limit. Some charge a monthly fee whether or not you use the card.
Balance Computation Method:
If you don’t have a grace period, or if you expect to pay for purchases over time,
it’s important to know what method the issuer uses to calculate your finance charge.
This can make a big difference in how much of a finance charge you’ll pay -- even
if the APR and your buying patterns remain relatively constant.
Examples
of balance computation methods include the following:
- Average Daily Balance: This is the most common calculation method. It credits
your account from the day payment is received by the issuer. To figure the balance
due, the issuer totals the beginning balance for each day in the billing period
and subtracts any credits made to your account that day. While new purchases may
or may not be added to the balance, depending on your plan, cash advances typically
are included. The resulting daily balances are added for the billing cycle. The
total is then divided by the number of days in the billing period to get the "average
daily balance."
- Adjusted
Balance: This is usually the most advantageous method for card holders. Your
balance is determined by subtracting payments or credits received during the current
billing period from the balance at the end of the previous billing period. Purchases
made during the billing period aren’t included. This method gives you until the
end of the billing cycle to pay a portion of your balance to avoid the interest
charges on that amount.
- Previous
Balance: This is the amount you owed at the end of the previous billing period.
Payments, credits and new purchases during the current billing period are not
included. Some creditors also exclude unpaid finance charges. Two-cycle
Balances: Issuers sometimes use various methods to calculate your balance
that make use of your last two month’s account activity. Read your agreement carefully
to find out if your issuer uses this approach -- if so, what specific two-cycle
method is used.
If you don’t understand
how your balance is calculated, ask your card issuer. An explanation must also
appear on your billing statements. Or, find out more about credit
card interest calculations...
* See
a complete list of all the best credit cards >
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