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Frequently Asked Questions about Credit Cards
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Mean? |
How do I get a credit card?What are different types of cards out there?
What is the difference between credit cards and debit cards?
My credit card has been lost or stolen. What should I do?
How do I increase my credit line?
There is an error on my credit card statement. What should I do?
Why does my friend's credit card has different rates and fees from mine?
How do I reduce my interest rates?
There is a Late charge/ over limit charge in my statement. What should I do?
You can get a credit card can be obtained many different ways. The most common way is by responding to a direct mail solicitation sent to you by a financial institution. Often the financial institution has some idea about your credit history by some means. You can also apply online for a no annual fee platinum credit card.with 2.9% intro APR and 9.9% fixed APR from Nextcard. It takes only few minutes.
What are different types of cards out there?
Bank Cards- issued by financial institutions like discover card and cards carry visa or master card logo
Travel and Entertainment cards- issued by institutions like Diners club and American Express
House Cards- issued by department stores, gas companies and telephone companies.Usually good for internal purchases only.What is the difference between credit cards and debit cards?
When you are making purchase with your credit card, your card issuer is loaning you the amount of purchase upto your credit limit. Naturally you are expected to pay an interest on the amount you owe. But debit cards are linked to your savings and/or checking account. When you are making a transaction with your debit you are actually taking the money from your own account. So debit cards are electronic form of checks. They are issued by banks where you have checking/savings account.
Debit cards are linked to your checking and/or savings accounts. So you should check with your bank to see if it offers a debit card option. Debit cards are a convenient, safe, and widely accepted alternative to cash and checks.
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My credit card has been lost or stolen. What should I do?Notify the financial institution that issued the credit card. They will cancel the card. Even if you are not absolutely sure if the card is missing or you just misplaced it somewhere, it is good to cancel the card. You can always get new card within a week, usually without any additional charges. It's always a good practice to keep a list of your credit card account numbers and their toll free customer service telephone numbers in a safe place in case your cards are lost or stolen. In most cases your liability of a lost stolen card is limited $50 if you report the loss within immediately. For Debit and ATM cards the liability is usually upto $500.
How do I increase my credit line?Most credit card issuers are now able to authorize an increase in credit lines over the phone. If you have been using the credit card responsibly for some time, your request will be granted. When requesting an increase in credit line tell the specific amount you require, rather than leaving it upto the financial institution. It is you who knows your financial scenario better than your issuer. Many times, if you have demonstrated the ability to use your card responsibly, your credit card issuer may offer you an automatic increase.
There is an error on my credit card statement. What should I do?
If you find an error in your credit card statement, call the financial institution that issued the card immediately to dispute the charge. The credit card issuer will investigate the transaction. While the charge is being disputed, you are not liable for the payment of the transaction in question or the interest it accrues.
Why does my friend's credit card has different rates and fees from mine?Master Card and Visa rates are set independently by the banks issuing them. In fact, a given bank may offer several different rate and fee schedules. Sometimes you can pick which one you want; other times the bank will offer you a single set of terms with no option, even though it offers another customer a different set of terms. That's why it's worth shopping around rather than just applying for "a Master Card" or "a Visa."
How do I reduce my interest rates?The good news is credit card market is a buyers market. If you are a responsible user with good credit standing, you can request the financial institution to reduce the interest rate on balances. Some of the issuers do reduce the rate if you request. Hey, what you have to loose? A few minutes perhaps!
There is a Late charge/ over limit charge in my statement. What should I do?
Most issuers charge $20 to $35 each for late payments and over limits. In the recent years issuers have been enforcing this, as the market place has become more competitive. However if you call the your financial institution and request to remove the charge, sometimes they comply. If you make it a habit they probably wont remove the charges. Otherwise it is worth a try. I tried this four or five times. Except one card, everybody else removed the charge
Some credit cards charge an annual fee for using the credit cards. Usually credit cards charge an annual fee only if you have a less than perfect credit or if the card offers exceptional services
Annual Percentage Rate(APR) is the annualized interest cost to carry the balance on a loan or credit card from month to month. The interest is calculated using compound interest instead of simple interest. For example a monthly interest of 1% is equivalent to an APR of 12.68%((1.01 ^12 ) -1) instead of 12 %
It is the current credit available to you. It is credit limit minus current balance
Back to TopThe average daily balance is a method used to calculate finance charges in most states in US. It is calculated by adding the outstanding balance on each day in the billing period, and dividing that total by the number of days in the billing period. The calculation includes new purchases and payments. So the day of payment and day of purchase affects the finance charge.
Moving outstanding balance from one credit card to another credit card. It is a good way to save money to do a balance transfer to credit cards with low introductory APR and low APR.
The number of days between the last statement date and the current statement date.
Back to TopThe monthly bill from a credit card issuer that describes and summarizes the account activity on an account. A billing statement includes the outstanding balance, purchases, payments, other credits, finance charges, cash advances and other transactions for the entire month.
The issuer's written statement of terms and conditions relating to the administration a credit card account. The agreement states the annual percentage rate, the monthly minimum payment formula, method for calculating finance charges, annual fee, if applicable, and the cardholder's rights in billing disputes.
An loan from a credit card account. The Card Company will charge interest from the day the advance is taken until the day it is paid off. .Sometimes cash advances are charged at a higher interest than purchases. A transaction fee may also be charged based on the amount of the withdrawal.
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Cash Advance FeeA one-time fee for cash advances in addition to normal interest charges. This fee is usually a percentage of the advance amount with a maximum limit.
A card that requires full payment of the balance by the due date.. The American Express card and Diners Club card are examples of charge cards. The entire balance is due in full when the bill comes due. You can carry a balance and make monthly payments over time for a credit card.
A loan used to refinance existing loans. It usually results in a lower monthly payment at a lower interest rate.
A person who signs a loan or credit card agreement with the primary applicant. The co-signer is responsible for paying the balance of the loan or debt if the primary applicant default.
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Credit LimitThe maximum amount that a person may owe on a credit card at any point of time, including purchases, cash advances, finance charges and fees.
At is a measure of financial health. It is the percentage of income required to pay outstanding debt every month. A debt ratio over 35% excluding mortgage probably requires rethinking of new debts.
Failure to repay a loan according to the terms. If a person defaults on a loan, the issuer can take legal actions to force the person to pay the balance of the debt.
Payments put off to a future date or extended over a period of time. Interest will usually accumulate during deferment.
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Delinquent AccountAn account on which payments have not been made according to the terms and conditions of the cardholder agreement.
The day a payment is due to a creditor. After the due date, a late fee or finance charge may be charged, a late payment may be reported to the credit reporting agencies, and the account may be considered delinquent.
The total amount paid to use credit. Finance charges include interest, service and transaction fees, premiums paid for credit protection etc.
Back to TopAn interest rate that changes only if the issuer notifies cardholders through an amended cardholder agreement. Federal law stipulates a minimum of 15 day's advance notice is required. If the card holder decides she can not to have any more new charges in the account and pay off the existing balance under the existing interest rate.
Grace period is the interest free time period between date of purchase and the due date for the statement including that purchase. On an average grace period of credit cards is 25 days. If you carry a balance on the credit card you do not have a grace period, as you will be charged finance charge from the day of purchase. Usually cash advance does not have a grace period.
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Interest RateIt is the cost of borrowing money, expressed as a percentage. It is calculated as: real interest rate + inflation rate + risk interest rate
A fee charged to an account when a payment is received after due date. You MAY get the Late payment fee waived you call the credit card company and request.
It is the smallest amount that can be paid by the due date to meet the cardholder agreement. Usually minimum payment is slightly above the finance charge. So it will take an insanely long time to pay off a credit balance if you pay only the monthly minimum payment.
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Outstanding BalanceThe total amount owed on a credit card or loan at any point of time.
When the total amount owed is greater than the credit limit on a loan or credit card. Any combination of purchases, cash advances, fees or finance charges may cause the balance to exceed credit limit. Usually a fee is associated with the occurrence of this. Credit card companies MAY waive the of the limit fee if you call the card company and request.
The status of an account when the minimum payment has not been received by the due date. The minimum amount that should have been paid is the past due amount.
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Periodic RateThe interest rate described in relation to a period of time. For example, the monthly periodic rate is the cost of credit per month; the daily periodic rate is the cost of credit per day.
The date that a purchase, cash advance, fee, service charge or payment is recorded on an account.
The total balance due at the beginning of the present billing cycle.
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Prime RateThe base interest rate on corporate loans posted by at least 75% of the nations' 30 largest banks. The Prime Rate is reported in Wall Street Journal every day. Variable interest rates usually are expressed in relation to prime rate. eg: " prime rate + 8%" means interest rate will be 8% above the prime rate reported by Wall Street Journal
A credit card that supplies benefits based upon the card's usage. Benefits are usually in the form of services, such as airline tickets, discounts on future purchases or cash back bonus. The credits accumulated toward these benefits are often a percentage of amount charged to the card.
A credit agreement that allows consumers to pay all or part of the outstanding balance on a loan or credit card. As the balance is paid off, credit becomes available again to use for another purchase or cash advance.
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Secure CardA credit card which is guaranteed by a security deposit held in a special savings/checking account or deposit. The credit line on the card is usually more than the amount of the deposit. If the cardholder fails to make payments, the issuer will apply the deposit toward the outstanding balance.
The date a when a transaction like purchase, cash withdrawal, or balance transfer took place. Some companies assess interest from the transaction date, many from the posting date.
A charge for credit activities such as using an ATM, balance transfer, or cash advance.
Variable Interest RateAn interest rate that changes based on prime interest rate as opposed to fixed interest rate. A variable rate credit card will often have an interest rate expressed like prime rate + 8% meaning that the interest on the card is the prime rate plus an additional 8%.
When the total outstanding balance is paid and there are no new charges or cash advances during a billing cycle.
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