![]() Once that period ends, the standard rate will apply to any new or existing revolving balances. You may also be able to make larger purchases with smaller interest payments during the introductory period.īut make sure you find out what the standard rate will become once the introductory rate expires. While your interest rate may go up after the introductory rate’s expiration, the initial lower rate may give you the opportunity to pay down debt faster. Introductory rateĪn introductory rate is a temporary interest rate that’s lower for a designated period of time. And some credit cards might offer promotional APRs for things like balance transfers or new accounts. For example, cash advances often have a higher rate than everyday purchases. It’s also important to know that APR can change based on the type of transaction. But it can be increased by the issuer after you’ve had your credit card for one full year. The interest rate on a card with a variable rate is tied to an index, such as the prime rate. Take note of whether APR is a fixed or variable rate. For example, if you have an APR of 24%, the monthly finance charge would be 2%. It’s calculated as a yearly rate, so if you want to know what percentage you would pay each month in interest, divide the APR by 12 months. This method gives you until the end of the billing period to pay your balance and avoid the interest charges.ĪPR is the finance charge or interest rate you pay on purchases when you carry a balance on your credit card. Purchases made during the current billing period aren’t included in the adjusted balance. Adjusted balance: To figure the balance due, your issuer might subtract payments or credits received during the current billing period from the balance at the end of the previous billing period.Then the total is divided by the number of days in the billing period to get the average daily balance. At the end of the billing period, the resulting daily balances are added together. Average daily balance: In this commonly used method, your issuer might track your balance day by day, adding charges and subtracting payments as they occur.The two most common methods for calculating finance charges are: If you carry a balance on your card, it’s important to know that balance will cost you in finance charges. A closer look at your credit card terms and conditionsĪs you dig deeper into your credit card agreement, here’s a closer look at some other terms to know. A grace period isn’t an extension of your payment due date. Grace periodĪ grace period lets you avoid finance charges if you pay your balance in full on or before the date your bill is due. If you need a cash advance, you may be able to use special checks or an ATM to make a withdrawal. But cash advances may have higher interest rates and other fees than typical credit card purchases. Cash advanceĬash advances allow cardholders to borrow money against their existing credit lines. But keep in mind you’ll probably still be charged interest unless you pay off your full balance each month. Paying at least the minimum each month is one way to avoid late fees and other penalties. The minimum payment is the smallest amount you can pay by the due date and still meet the terms of your card agreement. And keep in mind that your limit may be increased after you’ve had the card awhile and shown that you’re responsible about paying your bill. Using less than 30% of your total limit may help your credit score over time. In general, it’s best to stay well below your credit limit if you can. Credit limitĪ credit limit is the maximum amount your credit card issuer allows you to charge on your credit card. To get a clearer understanding of how the terms and conditions of your credit card might affect you, it can help to start by familiarizing yourself with these common terms: 1. ![]()
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