The Ultimate Guide to Credit Cards

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  1. If you lose your grace period, quickly get it back. Failing to make a payment in the full amount of your statement balance will cause you to retroactively lose your grace period, but you can immediately restore it. As soon as you realize that you have lost your grace period, make a payment that covers your entire current outstanding balance. This won’t affect the interest accrued on past charges, but will make future charges eligible for the grace period. Nevertheless, cardholders may even be successful in requesting that their card issuer waives an occasional interest charge, especially if it was due to a one-time mistake or some circumstance outside of their control.
  2. Keep a grace period on at least some cards. Since each card has its own grace period, it is possible for cardholders to save money on interest by making payments in full on some cards, even if they must carry a balance on others. For example, a business traveler might use one card for expenses that are reimbursed by his or her client or company. By dedicating those reimbursement checks to paying each statement balance in full, the traveler utilizes the grace period to avoid interest on those expenses, even while possibly carrying a balance on other cards.
  3. Know which transactions apply. The grace period does not apply if you are using your credit card for cash advances or cash like transactions.

Paying off the full balance each month isn’t possible for all credit card holders to do. It is for this very reason that it is important to understand your Annual Percentage Rate (APR).

Annual Percentage Rate (APR)

A credit card’s interest rate is the price you pay for borrowing money. For credit cards, the interest rates are typically stated as a yearly rate, called the Annual Percentage Rate (APR). Where it can become a little more complicated is when the credit card has multiple APRs that apply to it. The interest rate you are charged will depend on the rules and policies of your card company. Credit card companies must follow legal guidelines established by federal government regulators.

While APRs may sound confusing and complex on the surface, once you know how to find your card’s APR and you know which APR applies to you, it is relatively simple. The problem for many cardholders, however, is that they don’t grasp the concept of the APR. Consumers either don’t know what rate they are being charged or how it relates to their own consumer behavior.

Here’s a common example that puts that into perspective. A credit card company may entice you to open a new account with them by promising a very low interest rate. Later on, however, you notice that they have started charging you two or three times as much interest – or even 10 times your original APR. Review the Basics of APRs so that you’ll never have to deal with this type of unexpected shock when you receive your monthly credit card billing statement.

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