photo credit: www.mikhailderivera.com
Credit Card Terms
If you don't understand the language, credit card offers and statements could lead you to deep debt. It's good to go back to basics, and much helpful to explore the fundamentals. Here are some of the Credit Card Terms which you must know.
Survey the Statement...
Terms and Conditions - Also known as the "agreement" which contains the rules governing the issuance and use of the credit card. By signing and/or using the card, you confirm that you have read, understood and accepted the Terms and Conditions.
Credit Limit - The maximum total for purchases, cash advances, balance transfers, and finance charges, which may be charged on your credit card.
Grace Period - The number of days before the card issuer begins to charge interest on your new purchases, usually a period of 20 to 25 days. The benefit of grace period is enjoyed only if you pay your bills in full. It is forfeited once your previous month's bill is not paid in full. Any new purchases will be immediately added to your outstanding balance and charged with interest.
Total Amount Due - Total amount you owe, inclusive of purchases, cash advances, finance charges, penalties, fees, etc., as of the statement date.
Minimum Amount Due - Least amount you need to pay on or before the Payment Due Date to keep your account from going into default. This is the sum of a) total outstanding balance (excluding purchases on installment) multiplied by the required payment percentage; b) monthly installment due, if any; c) any amount in excess of your credit limit; and d) all past due amounts.
Finance Charges - The sum of the interest charged on all transactions on your statement. Interest is usually computed by multiplying the Principal Amount, the Rate and the Time. Time here is computed on a per transaction basis because the different transactions on your statement may have varying posting dates.
Average Daily Balance - Most commonly used method of computing finance charge. It credits your account from the day payment is received by the issuer. To figure the balance due, issuer totals the beginning balance for each day in the billing period and subtracts any credits made to your account that day. While new purchases may or may not be added to the balance, depending on your plan, cash advances typically are included. The resulting daily balances are added for the billing cycle. The total is then divided by the number of days in the billing period to get the "average daily balance."
Ending Balance - Another method of computing finance charge. In this method, the interest rate is applied on the amount of your balance at the end of the billing period. This will include purchases and payments made during the billing period.
Figure out the fees...
Annual Fee - The amount you pay for owing and using the credit card. It varies depending on the type of card you choose and is added to your statement of account and every anniversary date thereafter.
Late Payment Fee - Charged to your next billing statement. If you fail to pay at least the minimum amount due on or before the payment due date. Some issuers charge a fixed amount while others charge a percentage of the minimum payment (e.g. 3% to 5%).
Cash Advance Fee - Charged to you each time you use the card to withdraw cash. This typically ranges from 3% to 5% of the total cash advance or a certain amount as agreed upon, whichever is higher. In addition to the cash advance fee, some card issuers charge interest or finance charge on the cash advance amount computed from the date of the availment up to your billing date while others compute interest only when cash advance amount is not paid on due date.
Overlimit Fee - Charged to you if your total amount due exceed your approved credit limit on your cut-off date.
Card Replacement Fee - Charged to you for the replacement of lost, stolen or damaged card.
Balance Transfer Fee - Imposed each time you transfer your balance from one of your credit cards to another.
Consider the choices...
Cash Advance - is a cash loan from your credit card through an ATM or over the counter. The interest rate for the cash advance is usually higher than the Annual Percentage Rate (APR) for purchases. In addition to the interest you will pay on the amount advanced, you are also charged a cash advance fee. Your cash advance limit is set as a percentage of your credit limit. At any given time, the total of your cash advances and any interest on them cannot exceed your cash advance limit.
Cash advance gives you easy cash access but is a very expensive form of credit.
Balance Transfer - the process of moving your unpaid credit card debt from one issuer to another with whom you also own a card. Card issuers offer teaser rates to encourage cardholders to transfer their outstanding balances to another issuer to avail of lower finance charges. This is one option if you are having problem paying your credit card debt. It lets you save on much higher monthly charges, hence a smart way to lower the cost of your outstanding balance. However it comes with a fee and the lower monthly rate offered may be only for a limited month. Ask about this to make sure you do not end up paying the same or higher monthly finance charges.
Installment Payment Facility - This facility allows you to purchase selected goods and services from merchants using your card and to pay for the same, together with applicable interest and other fees or at a zero percent rate, in equal monthly payments. In certain instances or promotions, issuer or card company may allow you to convert cash advance transactions, existing balances on the card or balances on credit cards from other issues into installment transactions, which shall be payable in equal monthly payments subject to the applicable interest and other fees.
Source: BSP
If you don't understand the language, credit card offers and statements could lead you to deep debt. It's good to go back to basics, and much helpful to explore the fundamentals. Here are some of the Credit Card Terms which you must know.
Survey the Statement...
Terms and Conditions - Also known as the "agreement" which contains the rules governing the issuance and use of the credit card. By signing and/or using the card, you confirm that you have read, understood and accepted the Terms and Conditions.
Credit Limit - The maximum total for purchases, cash advances, balance transfers, and finance charges, which may be charged on your credit card.
Grace Period - The number of days before the card issuer begins to charge interest on your new purchases, usually a period of 20 to 25 days. The benefit of grace period is enjoyed only if you pay your bills in full. It is forfeited once your previous month's bill is not paid in full. Any new purchases will be immediately added to your outstanding balance and charged with interest.
Total Amount Due - Total amount you owe, inclusive of purchases, cash advances, finance charges, penalties, fees, etc., as of the statement date.
Minimum Amount Due - Least amount you need to pay on or before the Payment Due Date to keep your account from going into default. This is the sum of a) total outstanding balance (excluding purchases on installment) multiplied by the required payment percentage; b) monthly installment due, if any; c) any amount in excess of your credit limit; and d) all past due amounts.
Finance Charges - The sum of the interest charged on all transactions on your statement. Interest is usually computed by multiplying the Principal Amount, the Rate and the Time. Time here is computed on a per transaction basis because the different transactions on your statement may have varying posting dates.
Average Daily Balance - Most commonly used method of computing finance charge. It credits your account from the day payment is received by the issuer. To figure the balance due, issuer totals the beginning balance for each day in the billing period and subtracts any credits made to your account that day. While new purchases may or may not be added to the balance, depending on your plan, cash advances typically are included. The resulting daily balances are added for the billing cycle. The total is then divided by the number of days in the billing period to get the "average daily balance."
Ending Balance - Another method of computing finance charge. In this method, the interest rate is applied on the amount of your balance at the end of the billing period. This will include purchases and payments made during the billing period.
Figure out the fees...
Annual Fee - The amount you pay for owing and using the credit card. It varies depending on the type of card you choose and is added to your statement of account and every anniversary date thereafter.
Late Payment Fee - Charged to your next billing statement. If you fail to pay at least the minimum amount due on or before the payment due date. Some issuers charge a fixed amount while others charge a percentage of the minimum payment (e.g. 3% to 5%).
Cash Advance Fee - Charged to you each time you use the card to withdraw cash. This typically ranges from 3% to 5% of the total cash advance or a certain amount as agreed upon, whichever is higher. In addition to the cash advance fee, some card issuers charge interest or finance charge on the cash advance amount computed from the date of the availment up to your billing date while others compute interest only when cash advance amount is not paid on due date.
Overlimit Fee - Charged to you if your total amount due exceed your approved credit limit on your cut-off date.
Card Replacement Fee - Charged to you for the replacement of lost, stolen or damaged card.
Balance Transfer Fee - Imposed each time you transfer your balance from one of your credit cards to another.
Consider the choices...
Cash Advance - is a cash loan from your credit card through an ATM or over the counter. The interest rate for the cash advance is usually higher than the Annual Percentage Rate (APR) for purchases. In addition to the interest you will pay on the amount advanced, you are also charged a cash advance fee. Your cash advance limit is set as a percentage of your credit limit. At any given time, the total of your cash advances and any interest on them cannot exceed your cash advance limit.
Cash advance gives you easy cash access but is a very expensive form of credit.
Balance Transfer - the process of moving your unpaid credit card debt from one issuer to another with whom you also own a card. Card issuers offer teaser rates to encourage cardholders to transfer their outstanding balances to another issuer to avail of lower finance charges. This is one option if you are having problem paying your credit card debt. It lets you save on much higher monthly charges, hence a smart way to lower the cost of your outstanding balance. However it comes with a fee and the lower monthly rate offered may be only for a limited month. Ask about this to make sure you do not end up paying the same or higher monthly finance charges.
Installment Payment Facility - This facility allows you to purchase selected goods and services from merchants using your card and to pay for the same, together with applicable interest and other fees or at a zero percent rate, in equal monthly payments. In certain instances or promotions, issuer or card company may allow you to convert cash advance transactions, existing balances on the card or balances on credit cards from other issues into installment transactions, which shall be payable in equal monthly payments subject to the applicable interest and other fees.
Source: BSP
RSS Feed