In today’s world, Credit cards have replaced paper money wisely and effectively all over. Since credit cards are designed in such a way that makes your life hassle-free with easier handling and shopping. One of the Key Elements of Credit Cards is that it provides complimentary services and features besides being just a mode/means of payment. Credit cards are normally termed as plastic money which makes the seller/buyer both satisfied and secure. Credit cards are very important when one needs money in case of an emergency or an unexpected happening. Additionally, it is also helpful for managing your money well.
Let us have a look at the contents / Key Elements of Credit Cards:
Credit limit: This is a limit sanctioned to your card defining your eligible amount to spend. This may include, cash advances, balance transfers, purchasing, and related fees. While you will be charged an over-limit fee if you exceed your sanctioned limit at any point in time.
Balances: This is the total amount outstanding on your part as playable against the purchases you made on the card and its finance charges. Hence, higher your balances mean you are leaving with lower available limits.
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Annual Percentage Rate (APR): This is an interest rate applicable on the outstanding periods after the grace periods. This APR varies with the nature of the transaction such as APR being high on balance transfers and cash advances while it’s normal on purchases.
Grace Period: This is the time frame when you are required to clear your outstanding amount on the card. It is being charged with finance charges. However, you might not be provided with a grace period if you have carried forward earlier months/s’ balances too. While balance transfers and cash advances do not have any grace period. Hence, where there is no chance of a grace period then the APR is applied directly to the balance.
Finance Charges: This is the price / effective cost chargeable on your balance. It has been calculated taking into account, both your outstanding balance /s and the APR. There are different types/norms to calculate finance charges on your outstanding amount. Creditors might take into account that one or two billing spans can also determine using an adjusted, average, or previous month’s balance, and may also add up the new purchases you made. The cheapest one for you is using the average daily balance method without new purchases.
Hence, where you don’t grace period and you are being charged APR directly your creditor may put in a minimum finance charge. If your calculated finance charge is less than the minimum, you must pay the minimum.
Incentives and Rewards: Some creditors in the industry provide and offer rewards and incentives to prevent card users from using their credit cards. Such as cashback, points to redeem, and discounts.
Credit Card Fees: Generally, Annual fees, finance charges, late fees, and over-the-limit fees are some of the most common fees.
