A credit card is a thin plastic card, usually 3-1/8 inches by 2-1/8 inches in size, that contains identification information such as a signature or picture, and authorizes the person named on it to charge purchases or services to his account -- charges for which he will be billed periodically. Today, the information on the card is read by automated teller machines (ATMs), store readers, and bank and computers. Credit cards are different from a debit card in that it does not remove money from the users account after every transaction. In the case of credit cards, the issuer lends money to the consumer (or the user) to be paid to the merchant. It is also different from a charge card (though this name is sometimes used by the public to describe credit cards), which requires the balance to be paid in full each month. In contrast, a credit card allows the consumer to "revolve" their balance, at the cost of having interest charged. Fill out the form to the right to see how much you could lower your credit card debt! Credit Card Terms
Annual Percentage Rate. The APR is a measure of the cost of credit, expressed as a yearly rate. It also must be disclosed before you become obligated on the account and on your account statements. The card issuer also must disclose the "periodic rate" - the rate applied to your outstanding balance to figure the finance charge for each billing period. Some credit card plans allow the issuer to change your APR when interest rates or other economic indicators - called indexes - change. Because the rate change is linked to the indexs performance, these plans are called "variable rate" programs. Rate changes raise or lower the finance charge on your account. If you are considering a variable rate card, the issuer must also provide various information that discloses to you: * that the rate may change; and
* how the rate is determined - which index is used and what additional amount, the "margin," is added to determine your new rate. At the latest, you also must receive information, before you become obligated on the account, about any limitations on how much and how often your rate may change. Free Period. Also called a "grace period," a free period lets you avoid finance charges by paying your balance in full before the due date. Knowing whether a card gives you a free period is especially important if you plan to pay your account in full each month. Without a free period, the card issuer may impose a finance charge from the date you use your card or from the date each transaction is posted to your account. If your card includes a free period, the issuer must mail your bill at least 14 days before the due date so you will have enough time to pay. Annual Fees. Most issuers charge annual membership or participation fees. They often range from $25 to $50, sometimes up to $100; "gold" or "platinum" cards often charge up to $75 and sometimes up to several hundred dollars. Transaction Fees and Other Charges. A card may include other costs. Some issuers charge a fee if you use the card to get a cash advance, make a late payment, or exceed your credit limit. Some charge a monthly fee whether or not you use the card. Balance Computation Method for the Finance Charge. If you do not have a free period, or if you expect to pay for purchases over time, its important to know what method the issuer uses to calculate your finance charge. This can make a big difference in how much of a finance charge you will pay - even if the APR and your buying patterns remain relatively constant. See page 4 for examples of how the methods can affect your costs. If you would like more information, fill out the form on the right hand side of your screen! >>
|
