To understand the terms and condition of a credit card it is important to read carefully the fine print when applying for it. When you receive a card offer you must not rely on what it states in big letters but actually you must read the whole document because banks and card companies nowadays are so devious that the important details are often written in tiny prints that sometimes we miss it.
Some of the most important terms I'm going to explain here:
Annual Fees
Most cards include annual fees as payment for a year membership, some cards don't. When applying for a card, choose the one that's best suitable for your needs and weigh in your options. Most cards nowadays are not hard to apply for unlike before. And often, Platinum and Gold cards can easily be acquired but most often these cards include the highest annual rates together with the interest each year. Even though annual rates are paid yearly, the additional cost is still money paid that should have been saved for other needs.
Penalty Charges
Many people tend to commit the fatal mistake of gaining penalty charges just because they forgot about their bills. Penalty charges are often seen when you over limit the balance of your card, when a person take cash advance out of it or when you forgot to pay your credit card debt. Penalty charges differ from card to card but it is still a pain to additional charges when in fact you can avoid it by paying on time.
Interest Method
These are interest schemes that differ from bank to bank or from credit card companies. There are three methods that people should be aware of:
- Adjusted Balance is the amount that your interest will be charged on your balance when a company sends you your debt statement.
- A previous balance is the amount that is charged with interest regardless of how much you paid and spent at the end of a billing period.
- And lastly, Average daily balance. This is computed by your balance for a day divided by how many days are included in your billing statement. This is the most common but the trickiest of the computation of your interest rates.
You should be aware of the methods stated above so you will be able to know how your interest rates is computed when you see your billing records.
Grace Periods and Currency Conversion Fees
You must be aware of crucial information for your credit cards. Grace periods should be remembered to avoid additional fees that can be charged to you when you failed to pay in a certain period of time. If you intent to use your credit card for purchase when you go abroad, you should be aware of the conversion rates for that period. You have to remember that conversion rates are often expensive so it'll be smarter to use cash instead and keep your card for emergency use only.