Understanding Your Credit Card
Confrontations in interpersonal circles usually arise with misunderstandings. When you do not understand your credit card the results will be a “confrontation” with you and your finances creating a whirl wind of disasters. This article will discuss the misunderstandings of your credit card and also provide an explanation for certain aspects of your credit card.
Misunderstandings concerning your Credit Card
The first misunderstanding is that credit card companies cannot change your rate. This is not true; your rate CAN be changed. This is because sometimes you might pay your monthly payment too late resulting in you becoming a liability and therefore they change your interest rate. Although the future might hold fixed rate companies but in the mean time you need to keep an eye on your dynamic rates. Another misconception in terms of your credit card would be that paying monthly on your credit card is the only thing you need to worry about. You are right in doing so and this makes you a diligent credit card holder but in terms of your credit score you need to worry about not maxing out your credit limit. If the credit bureau notices that you go beyond or push it to the limit they will automatically deduct points for this. You credit score is very important when you want a loan for example buying a car or a house. Furthermore if a merchant asks for your ID beware that this is not needed because the important thing is your signature on the back of the credit card. If someone does ask you for your ID when making a purchase this is a sign of fraud.
Understanding the difference between EAR and APR
You don’t need to go study finance to understand the workings and dealings that happen in banks and credit card companies. People commonly don’t understand the full meaning of interest rates; this can be bad for your debt. The main differences between EAR and APR (Annual Percentage Rate) are that EAR is not commonly known as a recognized legal term. EAR does not have one-time changes such as late fees, it also excludes balance transfers and changes in your interest rate. EAR refers to the ‘effective’ interest rate of the APR. While the difference of APR and EAR may seem trivial, the small difference can have a huge effect if you consider taking out a loan or on your credit cards.
Getting credit cards isn’t that complicated but you need to do some research and ask your banker about everything you need to know before gaining that plastic card. You will need to ask a lot of questions and don’t feel embarrassed that you don’t know certain things you aren’t alone and bankers want you to ask because that’s what they are there for.
Tags: credit card, Credit Cards