By Heather Giang, Credit Protection Alliance
Credit card companies keeps pushing hard to get more customers daily by giving “pre-approved” card offers to would be clients through the mail. Chances are you’ve gotten one of these offers in your mailbox recently. Getting such card is good to some extent. However, don’t rush into getting one without considering the plan terms associated with it.
There are lots of plan terms that you really need to study while shopping for credit card, so you do not if you put yourself in financial prison. These terms affect your overall cost. In this article we will take a look at some of this credit card plan terms you need to consider before choosing a company to deal with.
Reward program is term used for marketing strategies used by most banks or issuing banks to get more customers. They designed additional incentives to convince clients to get card from them. There are several types of rewards programs. Most common are free airline miles, cash back from purchases, and instant discounts.
Consider a company that gives “free period” or grace period over others. Because without free period, the card issuer may impose finance charge from the date you use your card or from the date each transaction is posted to your account. Free period allows you to pay back your balance in full before due date in order to avoid finance charges and it is usually mailed at least 14 days before the due date, giving you enough time to pay.
Periodic rate of a credit card is another term you have to know about. This is the amount of interest that is charged for a single period of the year. It can fluctuate from month to month.
Another very important term to take note of is APR (Annual Percentage Rate) which is the measure of the cost of credit, expressed as a yearly rate. APR often changes when there is a change in interest rates or other economic indicators. Still companies must disclose this before you open the account and on your account statements.
Apart from the annual percentage rate, you need to consider how much the issuer’s charges for membership fee. The annual membership or participation fees varies, it’s often between $25 and $100.
Preset Credit Limits: some card issuing companies have a preset credit limits on their cards. Receiver can not be able to exceed this credit limit because the issuing company will decline the transaction above limit they place on the card.
You also need to know about method issuers will use in calculating your finance charge if you don’t have a free period, or if you are expected to pay for purchases over time. Knowing this will help you keep your finance charge low by measuring your buying patterns and paying back on time. The bottom line is before applying for a credit card, read all of the fine print so you understand the terms that are related.
