You should know the basics before applying for the credit card, as it is important. Some of the most common terms are explained below along with their definitions that everyone needs to know.
Annual Percentage Rate (APR)
The cost of borrowing money on your credit card annually is the APR. There is a variety of APR’s of the credit card that includes APR on cash advances, purchases, penalties/default, and balance transfers. The APR on purchases is the rate of interest being charged after ending the grace period.
Credit Score
The credit score indicates how much responsibility you are to repay the amount that you loaned. Your every single activity will affect your credit score, that includes that number of cards you own, your entire payment history and the factors that are linked with your debt history.
If you own a credit card then it is your responsibility to use it carefully as your credit score also affects other areas of your life like getting a mortgage or car loan.
Annual Fee
The annual fee of the credit card is the yearly charge that every customer has to pay to use the card and to take advantage of its benefits.
The annual fee range of the credit card is approximately from $25-$500 every year that depends on the card. Mostly the consumers are in search of the credit card with the benefits they want but with zero annual fees.
Credit Limit
The credit card limit is the amount which you can spend using your credit card without experiencing any penalty. Likely, your credit limit on a credit card will below if you are having a short credit history and few credit accounts. However, your credit limit will be quite high if your credit history is longer and don’t have any negative information in it.
As time passes, the credit card companies raise your credit limit automatically, if you will make on-time payments and responsibly use your credit. If you will exceed the limit on your credit card then you may be charged with the over-limit fee.
Late Payment Fee
If by the due date you will not pay at least the minimum payment on your credit card then you will be charged with a late payment fee. The fee amount will be in between $25 and $37, which depend on your balance.
It is the big percentage of your balance for the small balances. If you are making recursive late
payments or if your single payments are late for more than 60 days then the APR will flip over
the penalty rate which ranges from 27%-30%.
Security Code (CVV)
On your credit or debit card, the security code or CVV (Card Verification Value) is used for making online transactions or card-not-present transactions. The purpose of this code is the security of your card, to ensure that you are the credit card owner.
It will also save you from the credit card skimmers that are used at the gasoline pumps. As the CVV card is not mentioned on the magnetic stripe of the card, so any skimmer cannot pick it up. In most of the cards, it is mentioned on the right side of the magnetic strip. On the American Express cards, it is mentioned of the front side of the card.
Due Date
The credit card due date is the date when your minimum payment is due on the credit card
company. The time for the due date is usually 5 p.m. but there are some credit card companies that are having the due date deadline that is a little late in the evening.
If you will not make your payment on time then you have to pay the late fee along with increased APR and you may be reported to the credit bureaus.
Minimum Payment
The minimum payment of your credit card is the lowest amount, which you can pay each month while standing good with your card company. Mostly it ranges from 1%-3% of your good standing credit card balance.
You may be assessed a payment if you have a relatively low balance on your credit card that is a percentage of your outstanding balance or $25 (whatever is high).
To pay the minimum amount on your credit cards is heavy on your credit score.
One of the highest budget debts is the credit card debt, if each month you will pay the minimum payment then to pay off your bill it will take a long time.
Grace Period
The time period in which after making a purchase the interest is not charged is the grace period on the credit card purchases.
If you will not carry a balance on your credit card then there may be a grace period only on
purchases depending on the credit card. By the Act of Credit CARD, 2009 the grace period must be at least 21 days.
Revolving Balance
A revolving balance on your credit card is the credit limit amount that you have used and not returned.
It is that part of your credit limit for which you pay interest (ARP) per day because in the previous month-end you did not repay the amount. You will not have a revolving balance if you will pay your credit card balance in full every month.