Five credit card Terms, you must know

The major credit card terms explains in this article. Credit cards are easy, right? You have a credit line. As long as your balance is not as high as your credit line, you can pay for things with your credit card. You never late the credit card payment. You pay interest on your credit card balance, and as long as you do not exceed your credit limit, everything is fine.

Well not quite. Here are some of the most common questions about credit cards – and their answers, of course.

What is interest?

In short, interest is the money you pay the lender for the privilege of using his money to buy something.

What is this about “interest rates” and percentages?

The interest rate is a way to determine how much you pay to borrow money on your credit card. It is mentioned as a percentage of the outstanding balance on your card, usually as a percentage or annual percentage rate. The lower the annual interest rate, the less interest you pay on the amount owed you.

Why would some people choose a hight interest rate credit card ?

Most people do not choose to pay a high interest rate. The bank decides the interest rate that it will bear on you, usually based on the amount of “credit risk”. They decide this by looking at your billing history. If you have a history of paying your bills on time, you’ll be eligible for lower interest rates. If you don’t have any bills to pay before, or if you have trouble paying your bills, this will appear in your credit history as well. Since lending money carries greater risk, banks will charge a higher rate of interest.

Another reason that people may actually choose a credit car at a higher interest rate is the rewards or benefits that come with this card. If the card includes special features you want, it may offset the higher interest rate and make it worthwhile.

My card says I am paying interest on “outstanding balance”. What does it mean?

Your outstanding balance is the amount that you owe in full on your credit card. Credit card companies generally calculate what is called the “average daily balance” for each month and the interest charges are based on that. If you had a $ 50 credit from the beginning of the 20th to the 20th, then $ 400 was charged from your computer, the interest would be calculated on average between 20 days at $ 50 and 10 days at $ 450.

What is the “minimum payment”? As long as I pay it, I’m fine, right?

The minimum payment is the lowest amount that a credit card issuer accepts toward your balance. It depending on your balance varies in different months . Paying the minimum balance may only keep your credit card active and prevent the credit card company from reporting your account as overdue, but it will hardly affect the amount owed on you. Whenever possible, you must pay more than the minimum amount. In fact, it is best to try to pay off your balance in full each month to avoid paying interest charges.

These are the five major credit card terms , you must know.

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