CREDIT CARDS » Credit Card Rates
Now, more than ever, it is important that you read every piece of collateral mail sent to you by your credit card company. Each time you feel you are getting stumped on a term, review this quick list for a full understanding of the terms that you have agreed to for the luxury of using your credit card. Some basic tips to assist you are:
- Average Daily Balance - Used for interest calculation, the average daily balance is the total balance being carried on a credit card divided by the number of days in that billing month
- Annual Percentage Rate - Aside from the cost of the purchases the APY is the interest rate you must pay
- Balance Transfer - The act of moving the balance from one credit to another that consumers may do to consolidate their debts or lower their interest payments
- Cash-Advance Fee - The rate you are charged for using your credit card to obtain cash
- Card Holder Agreement - The terms of agreement including interest rates, annual fees, and other details that you agree to abide by for the luxury of securing a credit car
- Finance Charge - The amount that you must pay in addition to the original cost of the purchases, the finance charge is computed from the purchase balance on the card and the interest rate
- Grace Period - The amount of time you have to make a credit card payment before you are considered "late"
- Minimum Payment - The smallest amount you need to pay off your balances monthly to keep your credit card in good standing
- Pre-Approval - Is a promotional offer used to entice new customers to apply for a new credit card, although the changes of getting a card that has been "pre-approved" is good, it is not guaranteed
- Principal Amount - The actual amount of debt you incurred for purchases on your credit card
- Secured Card - Credit cards generally used by those who have bad credit histories as the credit card company establishes a link directly to the card holder's savings account and withdrawals the monthly payments automatically
- Variable Interest Rate - A fluctuating percentage expressed in yearly terms that the credit card holder must pay regularly to stay active
The world of finances, including credit cards, tend to have their own glossary of terms to describe certain nuances and behaviors of the industry. If you are trying to get a hold of your credit, it isclimacteric that you gain a full knowledge of the language used by the credit card industry. Once you understand the credit card terms, your monthly statement will not seem as mysterious and confusing, thus allowing you to "tame the beast."
Since Congress overwhelmingly voted to pass a credit card legislation bill protecting consumers from unfair interest rate hikes and fees, credit card companies have been working to get their rates increases in before the legislation becomes official. In other words, your credit card interest rates were likely to have gone up yesterday as credit card companies raced to raise rates before the closing bell.
For instance, one of our readers notified us this morning that she received a letter yesterday that Chase was increasing her credit card interest rate from 9% to over 13%. The verbiage in the letter explained the reason for the rate increase was in order to "maintain the profitability" of the account. The notice gave a couple of weeks time to either a) close the account or b) do nothing and accept the rate increase.
Why did credit card companies rush to increase rates?
Under the new legislation:
- No more retroactive rate hikes - Credit card companies cannot increase rates on existing balances, but only on new balances.
- Longer notification periods - Credit card companies must give 45 days notice, rather than just 15
What should you do if your credit card rates have been raised?
- If you've had the card a while and have a history of good payments - You may want to keep it in order to keep the age of your good credit accounts as old as possible. Learn more about maintaining old lines of credit
- If you keep low balances - Consider keeping the card. The amount you're paying in interest is pretty low.
- If you keep high balances but good payment record - You may want to consider finding a lower credit card rate and transferring your balance.
- If you keep high balances but have bad credit or payment history - Focus on paying down your account, improving your credit, and then try to get a new card with a balance transfer. Also, it doesn't help you if they hiked your rate yesterday, but under the new legislation, if your rate is increased and you pay your account on time for 6 months, they have to reduce your rate again to the introductory rate offer.
Have you recently received such a letter or experienced a credit card rate hike? Tell us about it and what you plan to do.
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