Debt Views

I recently came across a report that talked about how few Americans really understand their credit card’s fine print and terms. In many cases understanding and managing your credit card in accordance with these terms can save a lot of money. And, I decided to write an article that will clarify some of the more important terms and what every cardholder should know about them. Though this listing is not complete, it’s a good start and getting familiar with these terms can actually help you decide which credit cards will best fit your situation.

APR: Short for Annual Percentage Rate, APR is the percentage you’ll be charged on the purchases you make. (Note: you can avoid paying interest if you pay your entire balance off before the grace period. See explanation for grace period below.)

Annual Fee: These fees vary by credit card. Many cards that require good to excellent credit will offer no annual fee. Credit cards for bad credit situations, whether secured or unsecured will almost always charge an annual fee. Charge cards, like those offered by American Express, also charge an annual fee (sometimes a very hefty one) in lieu of charging interest. Many card offers will waive the first year annual fee. The only way to know for certain is to read the fine print.

Bill Payment Fee: One of the more popular features today is the online bill payment option. This is the fee that you’ll be charged for the privilege of paying your bill online. It will vary by credit card issuer – some are offering it as a value-added service at no charge while others will charge a high transaction fee.

Grace Period: The grace period is the time between when your bill is prepared (not the date you receive it) and when you’ll be charged interest on your purchases. Grace periods can vary but usually run around 25 days. You can save yourself expensive interest charges if you’ll pay your card before the grace period ends.

Late Payment Fee: Making a credit card payment late, even one time, and you’ll probably be charged a late payment fee. Even worse is that a late payment can mean that you’ll be charged a default rate that can be much higher than your regular rate. And, if you have a low introductory rate, a late payment can make that go away.