Credit Card Checklist: What You're Looking For & What to Avoid
Content originally posted on Big 550 KTRS blog.
Written by: Pier Alsup, American Eagle Credit Union, Chief Community Engagement Officer.
April is National Financial Literacy Month, a month devoted to highlighting the importance of financial literacy and teaching Americans how to establish and maintain healthy financial habits.
Last week, we covered ‘Steps you can take to increase your financial IQ‘. In this article, we are sharing a helpful checklist of credit card features to consider and compare when choosing to open – and use – a credit card.
Annual Percentage Rate (APR)
There are three things to consider when looking at the annual percentage rate on your credit card:
PURCHASE RATE – the cost of borrowing on the card account, making purchases
BALANCE TRANSFER RATE- the cost of borrowing on the card account by transferring balances from other credit card accounts
CASH ADVANCE RATE – the cost of borrowing on the card account by receiving cash to use for your needs
Minimum Payment Amount
if you don’t pay off your balance each billing cycle, this is the amount you will be required to repay (typically 3-4% of the outstanding balance). The best thing to do is you pay off your credit card in full each month to avoid paying interest, but if you cannot, try to pay more than the minimum payment amount.
Interest Free Period
The Interest Free Period is the amount of days you have to pay your balance in full in order to avoid paying interest, and is optimal to help lower your debt and helps you keep a healthy credit score.
Finance Calculation Method
This system is how interested will be calculated if your balance is not paid in full by the due date, and varies depending on your credit card issuer and its terms.
Annual Fee
The annual fee on a credit card is a once a year fee that is added to your amount due. It’s important to note, that if you do not pay your account in full the month the fee is imposed, you will be paying interest on the fee (as well as your purchases). Some credit cards have an annual fee and some don’t, so make sure to read the fine print.
Credit Limit
Your credit limit is the maximum amount of credit for which you are approved to use on the card account.
Miscellaneous Fees
Over-the-limit fee- the fee for exceeding your card account’s credit limit.
Foreign transaction fee- a per transaction fee on international purchases; it is typically a % of the transaction amount
Late payment fee- the fee charged when you miss your due date
All credit cards are required to provide a summary of costs in a standard format, which is commonly known as “the Schumer box”. Named after US Senator Charles Schumer, this is an easy-to-read “box” of basic information regarding the card.
Remember, it’s important to review all aspects of your bills. This includes all of your credit card’s terms and conditions as there are various card features that are not covered in the Schumer box (such as travel insurance and purchase return protection). Taking the time to review your card’s complete terms and conditions will allow you to fully understand the credit you are using and take advantage of benefits afforded by it.
Credit cards can be tricky, but the more you know, the more you understand what to look for when selecting the right credit card for your needs.
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