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