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Ultimate Credit Card Guide

What is a credit card?

Believe it or not, credit cards are not magic pieces of plastic. A credit card is a financial tool allowing you to make purchases today, and pay for them at a later date. Credit cards are relatively expensive loan option when compared to auto loans, home mortgage and home equity loans. In the United States you need to be 18 years of age to apply for a credit card. You also will need to have income, such as a job, to to be able to make payments toward the items you purchase and charge to the credit card.

What does it mean to charge my card or charge it?

This is simply the process of paying for a purchase at a store or restaurant using your credit card. If you charge it, the issuer of your credit card pays the store for the purchase you are making. Then you make payments to your issuer until you pay off the purchase. This is called charging it.

History of the credit card?

The idea of a credit card started thousands of years ago with the concept of credit. This simple promise of taking possession today for something you promise to pay for in the future. Way back credit was truly this, a promise. If you didn’t pay, the person would probably take the item back, or possibly inflict bodily harm if they were not a relative.

What is credit?

Credit is the idea of promising to pay for a product or service at some point in the future. There is usually a cost involved with credit, which has been in many forms over the year.

What is Annual Fee or A.P.R.?

Credit card issuers charge a fee for the service they offer of loaning you money. This is referred to as the annual fee. The fee could stay the same or change each year. If you have opened a new credit card, look over the terms carefully. Many card issuers will waive or not charge you an annual fee in your first year, but then it shows up in year two. You should always know all the fees and terms of your credit cards.

What Are Credit Cards Fees?

First let’s look at some different types of fees.

What is a Credit Card Late Payment Fee?

If you do not make at least a minimum payment required for the month you will be charged a fee. Your due date will be clearly marked on your invoice. Late payment fees can range, and you should be familiar with your credit card and how much your issuer will charge you. This fee can easily be avoided by setting up automatic monthly payments to your credit card. Most issuers also allow you to customize your account, even setting up text or email messages to remind you of pending payments due, or pending automatic payments.

What is an Over The Limit Fee?

Some credit cards have a limit on how much you can purchase. This is also referred to as the credit line. If you charge too much to your card and go over your cards limit, some issuers will charge you this, “over the limit fee”. This fee varies and you should be familiar with your credit card, and the fees you are charged.

Foreign Transaction Fee

When you are in another country you have a couple of options for paying for food, hotels and souvenirs. You can take lots of cash with you and go to a bank and trade your cash for cash for the local country. The other option is to use a credit card to pay for these purchases. If you are going to another country and plan on using a credit card, you need to tell your credit card issuer you will be out of the country. When you make a purchase using your card, the total amount is charged to your card in the local currency as you will see on your receipt. Your credit card company will take this purchase and transfer it to your local home currency. This saves you the time of figuring this out. Your credit card company will charge you a fee for this service. Fees are figured out differently for many credit card issuers. You should review your credit card policy to know your costs before using your credit card outside of your country.

Additional Cardholder Fee

When you apply for and open a new credit card account, you may be asked if you want additional cards. Now this is not additional cards so you can have multiple wallets! No, this is for other people in your family. Perhaps you want your husband, wife or kids to have a card for your account. Carefully review your account documents to see if there is a charge to request these extra cards. It may be listed in your terms under additional cards, or additional cardholders.

Membership Fee

Some issuers use a monthly membership fee as in place of, or in addition to annual fees. The membership fee could be monthly or quarterly. You should be aware of all your fees and you should be familiar with all the fees including membership fees you may be charged by your issuer.

What Is My Credit Limit?

Every person may have a different credit limit. This is the total limit you can charge to your credit card. Your credit limit depends on various factors including your credit score, credit history, credit report, age, job status, income and more. You should review you credit card terms and know your credit limit.

How To Find My CVV or Security Code?

When making an online transaction or a purchase over the phone, you may be asked for the CVV or security number for your card. This code is imprinted on the front or back of your card. This code is used to prove you have the credit card. On a Visa or Mastercard, the security code is located on the back of the card, next to the area that you sign. With American Express, the code is on the front of the card to in small print on the right side of the card.

If the CVV code or Security Code 3 or 4 digits?

Security codes or CVV codes for Visa and Mastercard is 3 digits. The security code for American Express is 4 digits.

What is a credit card closing statement date?

This is the date when purchases are no longer counted for the current billing cycle. Each billing period has a start date and closing date.

What is a Grace Period?

No this isn’t the period when you pray to have the money to make your payment. This is the time frame between a closing date and the date your payment is due.

What is a credit card statement?

This is the report you receive each month. It includes the purchases you made during the past billing period. Other items you will find on your statement include your annual percentage rate (A.P.R.), annual fees, and closing date for the period. You should be familiar with this statement, and understand the fees and rates disclosed.