Credit card offers land in your mailbox on a daily basis. You are barraged with offers for “No Interest,” “Rewards,” and a myriad of other incentives to entice you to complete and send in their application. But with all that credit card information directed at you, do you really understand the fine print?
Credit card companies try to make it easy for you to apply, but you should understand all the options in their brochure jargon and lingo. It’s likely you have many questions about those applications, and here is a list of important FAQs you should know before filling out another credit card form:
What is an APR?
The APR is the annual percentage rate, or the interest rate that the credit card company charges you, on remaining balances carried over each month on your card. An APR could be fixed, variable, and introductory. Ultimately, you would want a credit card with a fixed APR, which ensures that you know what your charges will be each month.
What is an Introductory APR?
The introductory APR is a low or 0% interest rate offered to new credit card users just for signing up for a credit card. Some companies will have many stipulations that you must meet in order to obtain the valued introductory APR, such as requiring you to make a balance transfer (in detail below), make a certain dollar purchase on the new credit card each month, or limit the amount you pay on the credit card each month. An introductory APR lasts a limited time, usually no more than 6 months.
What is a Balance Transfer?
If you already have a credit card with a balance, you can transfer that balance to a low interest credit card. Many credit card companies offer balance transfer incentives, such as low or 0% interest, to encourage you to sign up with them. Balance transfers can work in your favor if you are approved for a credit card with a lower interest than the current card which holds your existing balance.
What is a Grace Period?
The grace period is the amount of time that a credit card company grants you past the due date to pay your balance in full or in part before a finance charge is applied. The grace period usually varies depending on the credit card issuer and can be from 10 to 30 days.
What is a Rewards Credit Card?
A rewards card is a credit card that offers “points” toward the purchase of merchandise or services, such as airline tickets or shopping gift cards. Some rewards will also pay the cardholder cash back for a percentage of every dollar they spend.
What is a Student Credit Card?
A student credit card is a type of card issued to college students who have no or little credit history. They generally have low credit limits and are intended to help a student begin his or her credit journey and establish credit.
Obtaining and using a credit card is a privilege, not a right.
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