Planning to apply for a credit card? Then it is essential that you learn some of the basics terms and definition that are associated with the best credit cards.
Annual Fee
As the term states Annual fee is the fee that is charged on the card on an annual basis. A card may come with zero or substantial annual fee. If you are not sure whether you are going to use your credit card, then you should choose to take a card that comes with zero annual fees. Or you could also choose to take a card in which the annual fee is reversed in you make payments of a certain amount.
Joining fee:
Joining fee is the fees charged when you take a new card, some cards combine this fee with an annual fee. You could choose to take a card with zero joining fee, or you could ask for your service provider to give you some additional benefits. Many cards like American express give extra reward points to new members as soon as his card is activated. Some card also gives free flight ticket vouchers, lounge vouchers, etc.
Annual Percentage Rate (APR)
The APR is the rate on which you are charged when you borrow money on your credit card. A credit card can have several APR’s, on balance transfers, purchases, cash advances, and defaults.
Credit Limit:
It is the limit which you can spend without making immediate payments. A credit limit is defined according to your past credit score and your card type. A credit card may automatically increase your credit limit looking at your past payment record and your usage.
Credit Score:
A credit score is an indicator of your likelihood of paying back. If you have taken an EMI on your card and you are not giving your credit card bills on time, it is very much likely that your credit score will do down, and it would be very difficult for you to take any new credit cards or get finance facility on any new purchases. On the other hand, if you pay all your credit card bills promptly, then your score is going to go up.
Due Date:
Due is the last date on which you are supposed to making your bill payment. If you miss making payment till due date, you will most likely be charged a late fee or an APR, and your credit score would also badly be affected.
Late Payment Fee
It is the penalty fee that you are obliged to pay once you have missed paying the bill on or before the due date. To avoid the late payment fee, the user is required to make the minimum payment before the due date. The late payment fee is dependent on the delay in making the payment. If the delay is for a few days, then the fee charged is less, but if the delay amounts to months, then a hefty penalty may be charged. Many credit cards also waive this fee is the delay is for just a few days, and all the payment in the past have been made on time.
Minimum Payment :
It is the minimum amount that you have to repay so that you don’t incur any late fee charges. However, if you pay only the minimum balance every time your credit score can get badly affected.
Revolving Balance:
Revolving balance is the balance that is due to a credit card. If someone is paid just the minimum payment, the rest of the amount is called the revolving balance. An APR is charged on the revolving balance since you have used the money and not repaid it. If you pay your entire credit card bill, you shall not have any revolving balance.
Security Code (CVV) :
Card verification value (CVV), also known as the security code, is present on all credit and debit card. The code comes in handy for “card-not-present” transactions such as online transactions. It adds another level of safety and security to make sure that the owner is using the credit card. Mostly, the CVV is printed on the right of the magnetic strip.
Taking a credit card is easy, but using it wisely is difficult. Be wise and enjoy the best credit cards by making optimum use of them.