Learning and understanding the terms used in credit card transactions may not interest you right now, but unless you understand what they mean, you may make a rather bad decision, and end up with a financial problem.
To know more credit card terms not listed here, visit www.creditcards.com
1) Average Daily Balance (ADB)
This is how credit card companies compute how much you should pay. They base it on what your balance is and then dividing that amount by the number of days in your billing cycle.
When they have the amount, they then tag on the interest rate which by now you should know. If you have an annual rate of 20%, then by dividing this with 12 months, you will get your monthly interest rate. Sometimes, computing your monthly minimum due is a therapeutic exercise because you see how your balance barely decreases even after you have paid the minimum amount due.
2) Balance Transfer
If you have another credit card, and you are interested in consolidating your finances as well as lowering the interest you are paying on the other card, then balance transfer will work well for you. There will not be anymore monthly interests to pay for because you would a monthly fixed rate to pay for a set amount of months.
3) Cash Advance Fee
With your credit card, you are allowed to get cash advance which means ready cash. The maximum amount would depend on your account balance and how much you are authorized for. You should call your credit card company to find out exactly how much you can avail of. For this transaction, you will be charged either a flat fee or a percentage of the money you are advancing.
4) Minimum Payment
This is the amount you must pay if you do not want to incur late charges or worse, default status. It may not be the total amount due, but just a percentage of your balance plus interest.
5) Grace Period
This is a specific time frame that the credit card company gives to the client wherein there is no interest charged. Suppose you buy something with your credit card, if you fully pay the credit card company within the grace period, you get charged zero interest.
6) Card Holder Agreement
This is the contract you sign when you get your credit card. It includes all the terms you agree to by using the credit card. There may be changes in the contract, but unless you were notified properly in writing by the credit card company, it is not valid.
All the terms used in a credit card transaction is found here in this agreement, and they are all explained, albeit in legalistic terms. Even if you do not sign the agreement and send them back the contract, by using the credit card, you are indicating your approval of everything that is written on that agreement. So, make sure you read the fine print very well, and understand them. If there is something you do not understand, talk to them. If there is something you do not agree, return the card, and have them receive the card along with a letter that you are not accepting the terms. This is very important because you could be charged for something you do not accept or have anymore.
Other Credit Card Article:
Quote of the Day:
Experts advise to always pay off your balance, don’t spend more than you have and keep your credit balance below 50 percent of your available credit. Experts advise to always pay off your balance, don’t spend more than you have and keep your credit balance below 50 percent of your available credit. – Julie Sherrier
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Conclusion:
Learn your terms now, and never have to worry in the future. Knowledge is power and to be able to manage your credit card finances well, you must make an effort to understand everything about credit cards.
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