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Whether you have one credit card or twenty, it is important that you are aware of how much using them really costs you. To know this, there are several factors you should take into account. These are variables to consider if you are considering obtaining new credit cards too. Learn all you need to know about how much a credit card can cost.
Know Your cards' Annual Percentage Rate (APR)
The APR is the interest rate of your card. Every credit card offer must include the APR and whether the rate is fixed or if it will rise. Many credit cards have variable interest based on prime. If the credit card interest rate will change from time to time, the issuer also has to tell you the periodic variation rate of your APR.
You should also know how your interest is calculated. You'll read something in your credit card statement about a balance computation method. This method is a formula used to determine amount of the outstanding balance on which you're charged interest during each billing period. All traditional credit cards use the same formula as most of the other credit cards. However, from time to time you can find a credit card using a different formula that can be to your advantage or most probably turn financing with that card extremely onerous.
Cost of Finance
The finance charge on your billing statement is the cost of credit for the month. It's calculated by multiplying the outstanding balance by the periodic rate. If you have a small balance you won’t notice how costly your credit card can be, but you should always watch the rate instead of the resulting charge. Since the latter will depend on the amount you owe and the amount you spend.
Credit Card Limit
Know your credit card limit. This is the amount of purchases and cash advances you can charge to your card. It is a good idea to not max out your credit card, but if you know you are close, be sure to know your limit. Exceeding this limit will make you incur in penalty fees and additional costs that will add up to your already high debt.
Supplementary Fees and Other Terms
Be sure to know if your card charges fees and how much they are. Most credit cards charge fees for balance transfers, cash advances, late payments and going over your credit card limit. Some cards charge an annual fee too.
Most credit cards have a grace period, which is the time during the billing cycle in which you can pay off the balance to keep from paying finance charges. You can take advantage of this period to reduce your credit card debt.
Your lender will give you a statement of terms that will have all of this information in it when you are issued a credit card. If you can't find this information in the materials or don't understand them, call the issuer for clarification. Credit Card companies are required by law to provide all the information regarding their products costs and features. Make sure to exercise your rights and request this information.
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