| When looking for a credit card it is important to | | | | day's balance and then dividing that total by the |
| understand the various terms related to credit cards. | | | | number of days in the billing cycle. |
| Below are some of the most common terms you will | | | | Billing Cycle |
| come across when searching for a credit card. By | | | | The number of days between the previous statement |
| understanding these terms you can better compare | | | | date and the current statement date. The billing cycle is |
| credit card offers and determine which is the better | | | | typically between 27 to 33 days long. |
| offer. | | | | Credit Line |
| Annual Fee | | | | This is the most you can charge on your account. |
| Many banks or card issuers may charge a annual | | | | Under some conditions, your card issuer may increase |
| membership fee for their credit cards. The fee may | | | | or decrease your credit line. |
| range from $25 to over a $100 depending on the card. | | | | Finance Charges |
| There are also many cards out there that no have no | | | | The total charge for using a credit card consisting of |
| annual fee! | | | | interest charges, late fees, transaction fees and other |
| Annual Percentage Rate | | | | charges. |
| Often referred as the "APR", this shows how much | | | | Grace Period |
| credit will cost you on a yearly basis. The lower the | | | | Many credit card companies offer a grace period |
| rate the less you will pay on interest charges. There | | | | where no interest is charged. The typical grace period |
| are two types of APR: | | | | is usually between 20 and 30 days. However, if there |
| 1. Variable APR | | | | is no grace period, finance charges will accumulate the |
| A variable annual percentage rate allows credit card | | | | moment a purchase is made with the credit card. |
| issuers to change your APR based on fluctuations in | | | | Introductory APR |
| indexes such as the prime rate. | | | | Also known as a teaser rate, many credit card |
| 2. Fixed APR | | | | companies will offer a low interest rate for an initial |
| A fixed annual percentage rate is not subject to | | | | period of time to encourage consumers to accept their |
| adjustment based on indexes like the variable rate. But | | | | credit card offer. After the initial period the rate will |
| beware that credit card issuers reserve the right to | | | | change to the stated interest rate. |
| change the your rate at anytime. | | | | Periodic Rate |
| Average Daily Balance Method | | | | This is the interest rate described in relation to a |
| This is the most common method that credit card | | | | particular amount of time. For example, the daily |
| companies use to calculate your payment. An | | | | periodic rate is the cost of credit per day. |
| average daily balance is determined by adding each | | | | |