Credit Card Terms And Conditions Explained

Understanding your credit card is something that more people should invest the time in doing.  If you don’t understand the terms of that credit card, you are still liable to them.  Since a credit card contract is actually a legal, binding agreement between you and the lender, it pays to actually know what is happening with the card.  Credit card terms and conditions are not all that hard to figure out, once you learn a few key aspects.

Why You Have To Know

There are several reasons you need to understand the actual legal aspects of your credit card.  For one reason, even if you don’t understand you still are going to face those charges.  Secondly, not all credit cards work in the same way.  You may be selecting a credit card that offers a new way of doing business that you’re not familiar with.  Finally, you should know your rights, too.  What if you don’t agree with the charges on your credit card?  What if you didn’t receive your bill? 

These things are all things that each credit card company is required to tell you before you sign on the dotted line of the credit card applications.  Before you submit an application, whether through the mail, over the phone or on the web, you will be provided with the terms and conditions of the credit card.  This will explain all of the finer points of owning this credit card.  You may not want to read it, but you should.

Here are some of the various things that you should know about when considering different credit cards.

APR:  Annual Percentage Rate:  This is the rate of interest that you will be charged for using the credit card.  Your APR is a very important number and one that defines just what you will pay.  Lower percentages are best because they will cost you less.  Interest will be charged to your account if you carry a balance beyond the grace period.  The percentage is based on your credit score and what the company is offering.

Variable Rate:  The variable rate of a credit card is determined by the amount of the annual percentage rate plus a certain amount which is determined by the lender of the credit card.  Since the annual percentage rate on most credit cards fluctuates, this variable is the amount by which it will vary.  You should know what this is before applying for the credit card.  In most cases, the variable rate is connected to a Treasury Bill or to the Prime Rate.

Grace Period:  The grace period of any loan is an important number.  That is the time from the time that the billing cycles ends until the next one starts.  During the grace period, if you pay off the balance of your credit card, you are not charged any interest rates on that amount.  When you apply for a credit card, this information is provided to you.  Many will run from 20 to 30 days.  The longer this period is, the more time you have to pay it off in full each month.

Annual Fee:  There are many credit cards that charge an annual fee.  This fee is a payment that is charged to your account each year that you have the account open and are required to pay it.  In essence, it allows you to use the credit available.  The annual fee is not something that has to be there.  In fact, as your credit improves, you may see the annual fee dropping or be removed all together.  Look for credit cards that offer lower or no annual fees to save yourself money.

Minimum Finance Charges:  This is the minimum amount of charge that you will face on your bill when finance charges are applicable.  If you don’t carry a balance, this usually is not issued.

Late Payment Fee:  If you actually go over your credit card’s due date, you will be charged a late payment fee.  This fee ranges greatly from one credit card company to the next.  In any case, it is expensive.  If you miss the payment date by just one day, you face these charges.  What’s more is that they also single that the credit card is likely to place a late notice on your credit report, too.  You should know what these fees are before you actually sign up for the card.

Transaction Fees:  Transaction fees are in place for special services.  For example, if you take a cash advance, you may be subject to a transaction fee that is a percentage of the amount that you’ve taken.  Some credit cards charge these for purchases and balance transfers, too.