Search:

The Basics Of Credit Card Terms

It can be confusing for consumers to get a firm grasp on the credit card industry when so many confusing terms are being thrown around. For consumers who want to stay on top of their debts and keep their finances in good standing, understanding these terms is vastly important.

Any item bought on credit will be subject to the APR- or annual percentage rate. This is just a term used to describe the interest that credit card companies charge from consumers who buy on credit. Likewise, it is good to get the lowest percentage rate possible so that less money is spent paying the credit companies.

The finance charge is closely related to the annual percentage rate. The finance charge is the resulting total that is to be owed by the credit card holder. This includes both the purchase of the items bought on credit and the APR that is applied to it. This is the total that the credit card holder ultimately owes the credit card company.

It's hard for those with poor credit to obtain a credit card. If they still truly have the need to buy on credit, there is the option of obtaining what is called a secured card. A secured card is linked to card owner's bank account, which will be used as a last resort of the credit card company to recover any debts that have no been paid.

If you've ever gotten a letter in the mail from a credit card company, you've probably seen the term pre-approval. Pre-approval is a term that would imply that the recipient is automatically qualified for a credit card. This can be misleading, however, because this is not the case. In fact, this only means that the recipient has a good chance of obtaining a credit card. This term is one of the most confused terms as a result.

A variable interest rate applies to credit cards, just like in other types of loan options. A variable interest rate is a rate that changes with the economy- meaning the interest rate can go higher or lower depending on market conditions. This is in opposition to the fixed rate, which doesn't change even when market conditions fluctuate over time.

Credit card companies also use the term minimum payment. This is a term that is used to describe the absolute lowest payment that a credit card holder can pay without getting into more serious financial problems. This amount is calculated by applying a certain percent to the total of the debt owed by the consumer.

There are quite a few terms when it comes to credit cards. Certainly, there are much more than previously listed. It is important for credit card holders to educate themselves with these terms in order to better conduct business and stay out of possible legal trouble. If there ever is a doubt or confusion as to what a credit card term means, you can usually consult a financial advisor or even the credit card company itself for more information on the subject.

By: Chris Channing

Check out the best credit cards. Also shop around by looking at a credit card comparison.

Article Directory: http://www.articlewisdom.com

Please Rate this Article

Not yet Rated