Opting For A Credit Card? Check Out Certain Terms


You've just received a "pre-approved" credit card offer in your mail. Without wasting a minute you're ready to accept it, especially if it's the "before-the-offer-expires" one. Wait! Don't be in a hurry. Shop around a little and then make your decision about that credit card.

Do you know that these "pre-approved" offers that pop up almost every time you open your mail are just gimmicks? Actually, the approval of your credit card depends on your formal application. If it fails to meet the criteria, you may be either denied the credit card or offered a higher interest rate on it. Moreover, don't be in the illusion that just because your credit card is pre-approved, it'll be compatible to your spending habits. Credit card basically means that you're borrowing money by paying some charges. So, it's essential to understand the terms and conditions of the credit card before accepting it.

Every credit card applier should be aware of certain terms before opting for that valuable plastic asset. Are you aware of them? If not, then read on?

Annual Percentage Rate (APR): It's the measure of the credit cost that is charged annually. Before opening your credit card account, you should be familiar with the APR. In addition, some credit card issuers may change your APR with the change in interest rates or other economic indicators. Programs allowing such change are called "variable rate" programs.

Free Period or Grace Period: Always find out whether your credit card gives you a free period lest you may be deprived of the benefit of avoiding finance charges on full payment before the due date. If your credit card offers a grace period, you should receive your bill 14 days prior to the due date, so that you get sufficient time to make the payments.

Annual Fees, Transaction Fees and other charges: It's vital to have knowledge about the annual and transaction fees charged by the credit card issuer. Besides this, you may also be charged in case of a cash advance, a late payment, or exceeding your credit limit. Sometimes, you've to pay a monthly fee even if you don't use your credit card.

The Bonus Program: If you're opting for a credit card that offers attractions like airline miles, merchandise, or cash back, check out whether there are any participation charges linked with them. If you think you won't get a chance to use these bonuses due to your lifestyle, then it's better to avoid such credit cards.

Zero percent financing: If you hold several credit cards, then a credit card with an initial 0 percent balance transfer rate would save you hundreds of dollars in the first year. However, such transfers may come with some charges. Check them out.

Credit card terms differ with the issuers. You should know how you'd use your credit card. For instance, if you are going to pay your full balance each month, then you should concentrate on annual fee and other charges rather than the periodic rate and the APR.

Moreover, you should know your credit card limit too. Also, find out how popular the credit card is and what are the features and programs of the credit card you've opted for.

Once you are well versed with the terms of the credit card, just apply for it!

James Marriott is a finance writer with more than 15 years of experience in writing financial content, including those related to credit cards, mortgages, stocks, investments, and funds. He has been with RNCOS, a premier financial writing services company, for 2 years as head of financial writing. He is also a regular financial columnist with renowned business journals. For your comments on the article and further financial assistance, please contact our staff writer at [email protected].