Credit Cards FAQ
A credit card can be a marvelous thing, it can help us get through months when the water heater bursts, when we get laid off from our job and need an extra cushion. But like a lot of have found out, a credit card can be your worst nightmare if you aren’t prepared with the facts of how they work.
This FAQ, frequently asked questions, is designed to get you caught up on everything you need to know about credit cards.
Credit limit
This is the amount of credit available to lend to you. The bank does not want you to use all of your credit limit because it means you pose a bigger loss to them if you do not pay.
Paying the minimum monthly payment
Is this a good idea? No. You never want to pay just the minimum monthly payment if you can avoid it. These minimum payments are designed so that you will never pay off your balance making the credit card companies a ton of money off you.
Grace period
The grace period can be anywhere from 1-25 days, and it’s the amount of time after you receive your bill that you must make a payment. You should always pay within this period.
Late Fees
These are one of the things you should avoid at all costs. You will always pay more in late fees than you would in regular interest charges. Most late fees are $35, so make sure to always pay on time or use automatic withdrawal from your checking account.
Interest Rates
When you are using your card, you’re borrowing money from the bank. In exchange for allowing you to borrow money, the bank charges you a fee, this fee is the interest rate on the borrowing of the money. Interest rates on credit cards are typically very high, 18% to 25% in some cases, which means if you accumulate a very big balance this is a huge sum of money you will be paying the credit card companies every month.
To give you an idea, if your interest rate is 25%, and you owe $1,000 in debt, you will be paying $20 every month or more than $260 every year just in interest.
Credit reports
Everything you do with your credit card is reporting on your credit card file and calculated into your credit card score. The federal government allows you to get a free credit report once a year, you can do so by visiting this site:
A credit card can be a marvelous thing, it can help us get through months when the water heater bursts, when we get laid off from our job and need an extra cushion. But like a lot of have found out, a credit card can be your worst nightmare if you aren’t prepared with the facts of how they work.
This FAQ, frequently asked questions, is designed to get you caught up on everything you need to know about credit cards.
Credit limit
This is the amount of credit available to lend to you. The bank does not want you to use all of your credit limit because it means you pose a bigger loss to them if you do not pay.
Paying the minimum monthly payment
Is this a good idea? No. You never want to pay just the minimum monthly payment if you can avoid it. These minimum payments are designed so that you will never pay off your balance making the credit card companies a ton of money off you.
Grace period
The grace period can be anywhere from 1-25 days, and it’s the amount of time after you receive your bill that you must make a payment. You should always pay within this period.
Late Fees
These are one of the things you should avoid at all costs. You will always pay more in late fees than you would in regular interest charges. Most late fees are $35, so make sure to always pay on time or use automatic withdrawal from your checking account.
Interest Rates
When you are using your card, you’re borrowing money from the bank. In exchange for allowing you to borrow money, the bank charges you a fee, this fee is the interest rate on the borrowing of the money. Interest rates on credit cards are typically very high, 18% to 25% in some cases, which means if you accumulate a very big balance this is a huge sum of money you will be paying the credit card companies every month.
To give you an idea, if your interest rate is 25%, and you owe $1,000 in debt, you will be paying $20 every month or more than $260 every year just in interest.
Credit reports
Everything you do with your credit card is reporting on your credit card file and calculated into your credit card score. The federal government allows you to get a free credit report once a year, you can do so by visiting this site:
https://www.annualcreditreport.com/cra/index.jsp