Credit Card Quick

Your Guide to Understanding Your Credit Card’s APR

Introduction

You see it, you know it costs you money, but you’re not sure exactly what it is. It’s the APR on your credit card, and it pays to understand the ins and outs of this acronym.

What is an APR?

APR stands for Annual Percentage Rate, or the amount of interest charged by the credit card company for your purchases each year. To figure out how much interest your credit card company would charge you for your purchases is to divide your APR by 365. However, the amount in interest you end up paying if you fail to pay off your balance each month is much more because of the concept of compound interest. If you want to always avoid paying finance charges and not worry about your APR, simply pay off your balances in full, before the due date each month.

What is an introductory APR?

An introductory APR is a special, “teaser” APR designed to attract new credit card customers. You will often find introductory APRs last between 6 and 12 months. After that, the card’s default APR will set in. Beware of introductory APRs because they can give you a false sense of security that you have a card with a great APR. Although a credit card company may offer you a zero percent introductory rate, the default APR may be quite high. Therefore, it is important to pay close attention to the card’s default rate and not just the introductory rate.

Will my credit card’s APR ever change?

Perhaps. However, due to the CARD Act legislation, your credit card company must inform you of the change, in writing, 45 days in advance of the APR change. When applying for a credit card, look for one that has a “fixed” APR, not a “variable” one, as a variable APR will change according to the prime rate.

How important is my card’s APR?

Although most people look just at card’s APR, it is important to also look at other features of the credit card when determining whether the card is right for you. In short, thoroughly read the card’s terms and conditions so you can fully understand all features of the card, including the card’s APR.

What to Consider when Applying for a Secured Credit Card

Introduction

If you want to establish or re-establish your credit, a secured credit card is often the way to go. Because a secured credit card requires a cash deposit as collateral, even those individuals with the poorest of credit can be approved for this type of card. Although the terms and conditions of most secured credit cards are relatively straightforward, it pays to really understand what these types of cards can offer.

Before you apply for a secured credit card, it is important to consider a number of factors:

• APR: Although, in general, secured credit cards have higher interest rates than unsecured credit cards, the APR from card to card does vary. In other words, compare the APR of several secured credit cards before you apply for one. Although you will want to compare APRs between secured credit cards, keep in mind that your ultimate goal should be to pay off the card balance in full, each month, as to develop good credit habits and build a strong credit score.
• Fees: Many secured credit cards come with an annual fee, so it is important to check these out when comparing secured credit cards. In addition to an annual fee, you may find that other fees, such as over-the-limit charges, can be quite steep (as high as $25 per transaction). It is important to understand, though, that the credit card company must disclose all fees related to the card, so carefully read the card’s fine print.
• Deposit: A secured credit card will always require a deposit, but the amount of that deposit will vary from card to card. In general, a secured credit card company will ask for a deposit of a few hundred dollars. Few cards – if any – will request a deposit of more than $1,000.
• Credit reporting: One of the most important parts of a secured credit card is their credit reporting to the three credit reporting agencies.  It is therefore very important to find out whether the credit card company reports to just one credit reporting agency or all three credit reporting agencies. In short, only apply for a secured credit card that reports to all three credit reporting agencies so you can use your credit history with the secured credit card to begin building a stronger credit score.

How to Make a Balance Transfer Work for You

Introduction

A balance transfer offer from your credit card may be a great financial tool for you. However, just like any other financial tool, you need to understand how balance transfer offers work in order to make the offer work best for you and your personal financial situation.

There are two, major factors to consider when searching for a credit card balance transfer offer: the balance transfer fees and the APR. In short, never accept a balance transfer offer from your credit card unless you are fully aware of all the fees and finance charges that are attached to the offer.

What to look for when using a credit card balance transfer offer:

• Introductory APR – The first thing you will want to note is the introductory APR being offered by the credit card company. Most balance transfer offers come with low, introductory APRs, but it doesn’t stop there. It is vital that you pay close attention to the length of the introductory APR, as credit card companies vary widely when it comes to this. It is quite common to find introductory APRs for as little as six months and for as long as 18 months.
• The default APR – Once the introductory period has ended, you will begin paying interest on your transferred balances. Many credit card companies lure in customers with attractive balance transfer offers, but end up hitting them with high APRs once the introductory period has ended. If you think for one minute that you may be unable to pay off the transferred balances during the card’s introductory period then you must pay close attention to the card’s default APR.
• Balance transfer fees – Once again, the credit card company may be offering a very attractive introductory balance transfer offer, but the details of the offer are often what matter most. Enter the balance transfer fee, or the fee you must pay to transfer your balances. This fee, which is usually a percentage of your transferred balances, may be as low as three percent or as high as five percent. For example, if you transfer a $5,000 balance and your balance transfer fee is five percent, you will be charged a $250 balance transfer fee by the credit card company.

How to Take Care of your Credit Score

Credit Score

You take care of your home, your kids and your health, but where does your credit score play into this equation?

For many of us, our credit scores are often neglected, which may lead to big problems when it comes time to obtain a mortgage, a car loan or any other type of credit. Instead of neglecting your credit score, give it the attention that it deserves so that you can obtain the credit that you deserve in the future.

Here’s how:

• Pull a copy of your credit report from all three credit reporting agencies at least once a year and go over them carefully, as to catch any errors, discrepancies or fraudulent activity. If you visit annualcreditreport.com you can retrieve a copy of your credit reports, each year, for free.
• Stay diligent and pay all your bills on time, each and every month, regardless of how small or insignificant you may think they are. Sure, you pay your mortgage, car payment and credit card on time each month, but what about your gas card, your electric bill and your water bill? Most companies, including utility companies, report to the credit reporting agencies, so you could be sabotaging your credit simply by neglecting these often-forgotten bills.
• Don’t go a credit card-closing spree, even if you don’t use the cards anymore. Although many individuals think they are doing themselves a favor if they close unused credit card accounts, they may actually be doing more harm than good. This is because every time you close an account, you lower your “available credit,” which therefore raises your debt to income ratio, which – you guessed it – drops your credit score.
• Make sure you really want a particular credit card and will use it before applying for it. Too many inquiries for credit cards will also lower your credit score, and may set you up for too much debt. One of the credit card types you will definitely want to keep in check is the retail credit card. This is because many retail credit cards come with very high APRs and related fees.

How your Credit Card may Protect your Purchases

Introduction

There are many reasons why it may be a smart move to make purchases using a credit card, but one of the most important may be because of the protection credit cards may offer buyers.

Most of the major creditors now offer something called “purchase protection,” which is essentially a feature that protects your purchases and provides a peace of mind.

Although purchase protection is offered by the major creditors, the truth is that few people actually take the time to learn about this feature, and instead only focus on the APR and rewards of a credit card. Although the general terms and conditions vary from one creditor to the next, the goal is generally the same: to offer you protection on your purchases.

• Time Frame – Purchase protection typically protects your purchases from accidental damage, loss and vandalism. Pay close attention to the payout terms of your card’s purchase protection, as the time frame during which you can make a claim will vary. The time limit for most purchases is between 60 and 90 days. In other words, your purchase is protected through the card’s purchase protection feature anywhere from 60 to 90 from the date of purchase.
• Payout – Another feature of purchase protection that may vary from one creditor to the next is the payoff amount. American Express, for example, covers purchases of up to $1,000 per occurrence or $50,000 per member account per year, while Visa’s Signature card is $500 per occurrence and an annual maximum of $50,000.
• Terms and Conditions – Each creditor’s terms and conditions vary widely, so take the time to thoroughly read what’s covered and how you must go about making a claim. Some creditors, for example, will require you to make a police report in the event of a theft, for example.
• Proof of Purchase – Although your purchase is recorded on the credit card statement, it is still very important that you hold onto your purchase receipt from the retailer so that you will be able to verify the date and the purchase price of the item in question.

APR 101: What you need to Know

Introduction

One of your responsibilities as a credit card holder is to fully understand your credit card.

Although the CARD Act certainly has helped protect consumers regarding their rights, it is still ultimately up to us, the cardholders, to understand the terms, rates and conditions of our credit cards so that we can always make the best decision regarding our credit.

One of the most important aspects of any credit card is the interest rate, or the APR. Sure, you think, I know my card’s interest rate, so I’m covered.

But it may not be as simple as that.

Understanding your credit card’s interest rate is not quite as cut and dry. Here are a few questions you may have regarding the interest rate on your card:

• What is the APR?

The annual percentage rate, or APR, is what you want to look for when determining your card’s interest rate.  Although the APR is generally straightforward, it may be of either the fixed or variable variety. A fixed interest rate will not change unless it is a promotional rate or if you fail to meet your cardholder terms and conditions, while a variable rate is one that will change and is often tied to the prime rate.

• Can my card’s APR change at any time?

The only way your card’s fixed APR can change is if the credit card company provides you with written notice of the change. A variable APR, however, can change at any time, so you will need to keep an eye out for any rate changes.

• What is a default APR?

A default APR, which will be clearly listed alongside your card’s APR in the terms and conditions section of your credit card statement, is charged when you fail to meet your cardholder obligations. For example, your credit card company may charge you a default APR if you are more than 60 days past due on your account. However, the default APR can only be charged on future purchases, and you can opt to cancel the card and pay off your balance at the previous APR if you feel the default APR is too steep.

Common Terms for Balance Transfer Credit Cards

Introduction

Balance transfer credit cards are becoming increasingly popular in the credit card sector, as many individuals are searching for easy ways to consolidate their higher-interest credit cards into one, easy-to-manage credit with a lower interest rate.

However, balance transfer credit cards may be a bit more confusing to understand, based merely upon the fact that the entire balance transfer process will vary greatly from one credit card to the next. Because of the differences in terms and features between balance transfer credit cards, it is important to thoroughly read the cards’ terms and conditions.

And in order to understand the balance transfer credit cards’ terms and conditions, you must first have a good understanding of the terms commonly used:

• Annual Percentage Rate (APR) – The APR is essentially the cost of using the credit card; it is commonly expressed using a yearly interest rate. The credit card company simply charges a fraction of the annual rate (for every 30 days) when figuring out the finance charges on the outstanding balance. This calculation is often referred to as the “periodic rate.”
• Balance Transfer – Balance transfer is essentially the process of transferring debt from one credit card account to another.
• Balance Transfer Fees – Many balance transfers come with a fee that is charged by the credit card company for completing a balance transfer request. The balance transfer fee is either a flat fee or a percentage of the balances transferred.
• Credit Limit – A credit card’s credit limit is the maximum that you can borrow on a credit card.
• Default APR – The default APR on a credit card is an APR that is imposed by the credit card company when a customer fails to uphold his or her credit card agreement. Default APRs can be imposed on customers who fail to pay just one of their credit card payments on time.
• Introductory APR – Many balance transfer credit card offers come with an introductory APR, which is the APR that is charged during the introductory period. Once the introductory period has ended, the credit card company will change the APR.
• Purchase APR – The purchase APR will be the APR imposed for purchases; this will often differ from the introductory period for the balance transfer APR.

The First Five Things to do when you Receive a Credit Card Offer

Introduction

As the lending industry loosens up a bit, you may be surprised to see more credit card offers in the mail. In fact, if you are receiving credit card offers then you can be certain that you are the small minority of credit card users being aggressively targeted by credit card companies because of your excellent credit.

These unique circumstances may provide you with the opportunity to snag that really great credit card for which you’ve been looking. However, with multiple credit card offers being delivered into your mailbox every week, how do you begin examining and comparing the offers?

Although each credit card offer will come with its own benefits and advantages, there are five things that you should take a moment and review when comparing credit card offers:

1. Review the APR – The APR on the credit card will likely allow you to eliminate certain cards right off the bat. So, it only makes sense to take a look at the card’s APR immediately upon opening the credit card offer.
2. Review the terms of the APR – A credit card’s APR is only as good as the terms and conditions that are attached to it. Don’t be fooled by a low, promotional APR; instead, find a card with a great low, fixed interest rate so you won’t have to play the game of transferring to another credit card the moment the card’s promotional APR expires.
3. Review the balance transfer options – If you have outstanding debt on other credit cards, you may consider transferring those balances to your new credit card. Luckily, many credit card offers come with balance transfer options; just be sure to check the terms and conditions, including the APR, associated with the balance transfer offer, as they will usually differ from the card’s general terms and conditions.
4. Review the card’s rewards – If rewards are what you’re after, then examining the rewards is likely high on your priority list. Don’t skim through this material, though, as credit card rewards often come with their share of terms and conditions. Instead, take the time to read this information carefully.
5. Review all other terms and conditions – It can’t be said enough: take the time to read the small print! Your job as an informed consumer should be to make sure you completely understand all aspects of your credit card, and this happens when you read all of the card’s fine print.

What your Credit Card Company must Disclose to you

Introduction

The new credit card legislation that was recently enacted by Congress is designed to protect consumers from unscrupulous practices by credit card companies. One of the requirements under the new law is that credit card companies must disclose rules for solicitations, agreements and period billing statements to consumers.

The “small print” that must be disclosed must also be disclosed in an easy-to-read, easy-to-understand format. Here are some of the highlights of the new disclosure rules:

• Credit card offers must be easy to read. The fees of the credit card, along with the credit card’s APR, must be boldly displayed on the offer. In addition, the APR of the credit card must be displayed in at least a 16-point font. Any related credit card fees must be shown in an easy-to-understand table.
• If you apply for a credit card and are approved, the credit card company must send you a one-page agreement summary detailing the card’s terms and conditions. Although you will still likely receive the lengthy credit card summary you normally receive, the key terms will be highlighted on the one-page agreement summary.
• Your credit card statement will also be much easier to read. Large boxes on the front of the credit card statement will provide you with important information, including your account activity summary and your payment information. Other information that will be displayed prominently will include your new balance, the due date, the statement closing date, you previous payments and credits, and your minimum payment information.
• Your credit card company will also be required to provide you with a minimum payment warning that will show how long, and how much it will cost, to pay off your balance if you only pay the minimum payment. This may be a vital component to your credit card statement, as it will really detail the amount of money it will cost you if you only continue to pay the minimum payment on your card. This information must also be displayed prominently on the first page of your credit card statement.

Have you put your Balance Transfer Checks to Good Use?

Introduction

If you have a strong credit score you have likely received balance transfer checks with your monthly credit card statement. If you’ve never put these checks to use, you could be missing out on some great opportunities.

The best balance transfer checks from your credit card come in the form of 0% APR. You may also receive balance transfer checks with three or six percent APRs, which are also nothing to sneeze at. The great things about balance transfer checks are that you have the luxury of lower APRs, even if your credit card APR is considerably higher. Another great benefit to balance transfer checks is that you are often awarded the lower interest rate until that purchase is paid off.

Paying off High-Interest-Rate Loans

Credit card balance transfer checks are therefore great for paying off other higher-interest rate loans. From car loans to other credit cards and personal loans, balance transfer checks can be used for nearly any other type of loan, provided you have the credit limit to accommodate the transfer.

Many people also use balance transfer checks to pay for large things, such as home improvement projects, college tuition or vacations. Still, others simply write the balance transfer check to themselves, deposit the money into their bank account and use the cash for a wide variety of things.

Your Alternative to Personal Loans

One of the advantages of balance transfer checks over personal loans is that they usually come with much lower interest rates and they can be used on virtually anything you want or need. In addition, because you are already a credit card customer, you need not go through any type of loan application or approval process.

Balance Transfer Fees

One of the downsides of balance transfer checks is that you may have to pay a balance transfer fee or other type of fee. Keep an eye out for these fees, as they can often be steep. However, also consider the money you will save if you transfer your higher-rate balances to one with a 0% APR.

In conclusion, it is always best to weigh your options when it comes to balance transfer checks, as they may be able to provide with a low-interest loan to do any number of things.