Understanding Important Terms Related To Credit Cards

Cashless payment is the new in and credit cards are the most widely used plastic money these days. This is issued to users by banks or financial institutions to enable them to pay a merchant for various goods or services they purchase.

The first universal credit card was introduced in the year 1950 by the Diners’ Club Inc. Later the American Express Company issued a similar travel and entertainment card.

Here, we are discussing the important terms related to the Credit Cards.

• Annual Percentage rate

Annual Percentage rate or APR is the interest rate that is applied to balances carried beyond the grace period of the credit card. Credit cards can have varying APRs for different types of balances.  It is important to note that APR is always charged for keeping an outstanding balance on the credit card beyond the interest-free grace period, which is 30-45 days in most cases.

• Credit Card Balance Transfer

Credit card balance transfer simply means transferring the outstanding debt on an existing card to a new one. This process is normally used by consumers who wish to move the balance amount they owe to another card with-

• Lower interest rate
• Fewer penalties
• Benefits such as rewards points

 

• Credit limit

Every credit card has a credit limit. Credit limit is defined as the maximum amount that can be charged on the card which includes purchases, cash advances, finance charges, etc. Companies set the credit limit based on income, credit history, and spending factors. Ideally, the Credit utilization rate on a single credit card should not exceed 30 percent of the total limit.

• Secured and Unsecured credit card

Secured Credit Cards are ones which are issued against a deposit. In case of a secured credit card, the chances of credit card approval are much higher as compared to a traditional credit card.  Simply put, a secured credit card is backed by a cash deposit that users are supposed to pay beforehand. The deposit is returned to the user once he cancels his credit card after the repayment of any outstanding dues. Unsecured credit card, on the other hand, has no collateral associated with it.

• Due date

The due date is the date by which the user is supposed to pay at least the ‘minimum amount due’ on the credit card, if, for some reason, he/she is unable to pay the bill amount in full.

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