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Credit Cards : Understanding Credit Cards

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Below are some common terms used in credit card agreements:

Annual Fee: A yearly fee that a credit card charges for using the card. Many cards charge no annual fee, but others such as American Express, chase credit cards and those offering substantial reward programs may have such a fee. Annual fees may range widely. The consumer should always look for credit cards that do not charge any annual fee.  Click here for some of the top No annual fee credit cards deals.

APR (Annual Percentage Rate): This is your card's interest rate for a year. If you have a card with an APR of 16%, you will actually be charged a daily interest rate of .044% (16% divided by 365 days), as credit cardsChase Ulitmate Cash Award(sm) MasterCard® actually charge finance fees on a daily basis once you've gone past the grace period. The annual percentage rate is a bit easier to understand however, so use that as your reference when comparing cards. If you keep a balance on your card and do not pay it off, you will actually pay a bit more than the APR offered, because your balance will increase daily & thus the interest will go up. Click here for some of the best low interest rate credit card deals available online today.

Available Credit: Credit line minus the balance on your card. If you have a credit line of $5000 and have made $2000 worth of purchases, your available credit is $3000.

Balance Transfer:  It is an enticement to you as a new customer, the banks will often allow you to transfer your existing balance to the new card at an extremely low interest rate (sometimes as low as 0%) for a specified period of time. For example, if you are carrying a balance of $1000 on a card with an APR of 19.0% and Discover® Platinum Card with Cashback Bonus® Plusyou transfer that balance to a new card offering a transfer rate of 0% for six months, you could save yourself a large amount of money during that six-month period. The balance transfer rates are usually only temporary, and any balance that remains in your account after the intro period will then be charged at the card's normal APR. Click here for some of the best credit card deals with balance transfer and consolidation offers.

Cash Advance: Allows you to use your credit card in an ATM to get cash immediately. Credit cards offer no grace period on cash advances, and the APR on a cash advance is generally much higher than the APR on purchases.

Cash Back or Reward Credit Cards: Credit cards that offer you some sort of reward for using them. Some cards offer you cash as a Chase PerfectCardpercentage of your purchases made with the card, usually a small amount topping out at 1%. There are however credit card offers available online today that pay as high as 6% on your retail and gas purchases. Other cards offer incentives such as frequent flyer miles, or discounts on purchases based on your account activity.


High Risk Payment Processor: Some types of transactions and "some merchants are classified as high risk" For example say you visit a bankruptcy attorney and want to charge the bill to your credit card. By defenition your own credit is likely to be poor and the risk of a chargeback or dispute will be higher. Reducing and preventing chargebacks are important to high risk merchants.

Credit Line: How much you can charge to your card. If you have a credit line of $5000, you can buy $5000 worth of stuff. Your cash advance limit can be smaller than your overall credit line. If you exceed the credit limit, you can be charged over-the-limit fee!

Fixed Rate: Fixed rate is APR that will not change. If a card offers a fixed rate, you know that your rate will remain the same for the length of the credit card agreement (although terms could change in the future.) Contrast this with the Variable Rate definition below.

Grace Period: The length of time in which your new purchases will not be charged interest if you pay off your balance in full. If you buy something with your credit card today, then pay off your Discover® Platinum Card with Cashback Bonus® Plusbalance in full when the bill comes due, you will not be charged any interest. Many credit cards used to offer a 30-day grace period, but many have squeezed this down to 25 days--so pay off that balance if you can!

Secured Credit Cards: Cards for people with a bad credit history or no credit history at all. Secured cards , unlike unsecured credit cards,  work basically as debit cards--you put money into an account and your purchases with the card are madeagainst that money. There are also partially secured cards--for example, if you put $3000 into your account, your credit line may go up to $4500--and unsecured cards that do not require a deposit but charge high fees. Any type of secured card will charge you higher fees than a card for people with a good credit record, but it may be necessary to get this type of card if you don't qualify for other cards. Top-credit-cards.com, credit cards angel and mycoolcards.com are some of the websites offering some of the best deals for secured credit cards online.

Variable Rate: An APR that changes as published interest rates change. Many credit cards with variable rates will use an APR calculation of (Prime Rate + card interest).









 Chase Ulitmate Cash Award(sm) MasterCard®



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