Credit Cards have become essential for people to make purchases and manage their finances. It enables families to purchase homes, acquire goods and services, address medical or financial emergencies, and establish a credit history for cars, homes, and other significant purchases. Here are some frequently asked questions about these products.
What is the Annual Percentage Rate?
For Credit Cards, the APR is the interest rate. It is applied to your balance to calculate the interest you owe. The amount of interest owed is shown as a finance charge on your statement for any month that you pay interest. This is usually applicable if you fail to pay your Credit Card dues on time or pay only the minimum amount due.
What is the grace period on purchases?
Most Credit Cards help you avoid interest on purchases if you pay your bill fully before the due date. This is referred to as the grace period on purchases. It is the period between the date of the purchase and the due date. To obtain it, you typically must pay your bill in full each month. When the grace period does not apply to a purchase, interest is charged on the purchase from the date of the transaction.
Most Credit Cards do not offer grace periods on cash advances or balance transfers. You need to pay interest from the date of each balance transfer or cash advance. If you do not pay in full for one month, you lose the grace period. Typically, you owe interest to the bank or issuer from the first day of the billing period in which you did not make a full payment.
What happens if you pay only the minimum amount due?
Suppose you consistently pay only the minimum amount due on your Credit Card. In that case, it takes you a long time to repay the balance, resulting in a significant amount of interest payments. The interest depends on your APR and the outstanding balance. Pay as much as you can and as soon as you can by the due date.
What if you do not pay on time?
If you do not pay at least the minimum amount due, banks charge a late fee. Paying late may also cause your APRs or Credit Card interest rates to increase. You can determine your credit limit when you first receive your card. Over time, based on your usage, needs, and qualifications, it may change. Your current credit limit is displayed on your monthly billing statement.
If you exceed your credit limit, you may incur a fee. Additionally, your APRs may increase. Note that you may go over your credit limit even if the transaction is authorised.
Conclusion
Before finalising the best Credit Card, shop around. You will find a range of interest rates, reward programmes, and terms. The penalty fees, annual fees, interest rates, and grace period all factor into your total cost.
