Top Credit Card Terms To Know

Top Credit Card Terms To Know
April 13, 2018 K Compare
Credit card terms

Credit Card Terms

Are you a newbie to credit card world? Technically you know how to swipe the plastic card but wondering how to manage your accounts and cards with all those financial language in the air??? At first, it might look like card issuers are speaking a different language, but in reality, it is not that hard to be acknowledged with the terms associated with credit card. Today I will provide you with definitions of important key terms for your better understanding, and then start using them to your advantage.

Annual Fee:

This refers to the fee charged every year by banks for keeping credit card in your wallet. Not all credit card issuers charge annual fee but the ones that do varies from card to card. It can be as little as PKR 2000 to more than PKR 15,000.

APR:

Annual percentage Rate is the yearly interest rate (including fees) that you will be charged for borrowing the loan using your credit card. In simple words, you are returning back the money you borrowed plus, a little bit extra. However, you can dodge this extra money if you pay your balance in full every month.

Balance:

It is the amount of money borrowed by you, using the credit card, issued by the bank. If it is paid on time no interest or extra fees will be charged by the issuer.

Balance Transfer:

It is a simple procedure where you move an unpaid credit card debt (balance) from one credit card to another or a new one. This normally happens when card issuer charges little to no interest rates as their introductory offers.

Billing Cycle

refers to the period of time between the last billing statement and current billing statement. Generally, the billing cycle for credit cards ranges from 20-31 days, depending on the credit card and the issuer.

Credit Limit:

This is the set/maximum amount available on your credit card which you can borrow from your credit card company.

Credit Score:

It is a figure that shows your “creditworthiness”. In simple words, credit score is used by Credit card companies to determine your reliability for credit cards. Don’t forget, they are lending you money.  A high score indicates most likely you will pay back your debt. Your credit score is grounded on your credit reports.

Grace Period:

It is also known as “free-period”. Basically it is a particular period between the transaction date and billing date, given by the issuer to pay off your credit card bill before interest is charged on it. Normally, the grace period ranges from 20 to 30 days. Keep in mind that, cardholders who carry balances on their credit cards do not get a grace period.

Late Fee:

You are charged with a late fee payment when you fail to pay the minimum payment by the due date mentioned on your monthly billing statement. The amount differs from card to card and it can be found in the cardholder contract.

Minimum Payment:

The minimum payment is the smallest amount of money that you must pay by the due date, to keep your account from defaulting. Usually this amount is 5% of your total outstanding balance. If you pay minimum payment every month and not your full bill, it can keep you in debt for a long time because, interest will accrue on the portion of your balance which is not paid. Hence, for a speedy reduction in debt, you should try to pay more than the minimum payment every month.

Over-Limit Fee:

The term in itself probably clears everything up. It is the fee charged by the bank if you surpass the credit limit of your card.

Basic knowledge of credit card terms is essential. Without it, you can easily find yourself deep in trouble and of course in debt. In addition to this, it is way easier to compare credit cards when you completely understand terms offered by companies. Use https://www.karlocompare.com.pk/ to narrow down your choices and get the credit card that suits you best.

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