Credit Card Basics

Credit cards are very helpful when it comes to devolving and building credit. Nonetheless these small pieces of plastic can be very dangerous in the wrong hands. Credit is important because some of the most expensive things you will ever buy are determined by your credit score. Some only consider home and vehicle financing, but there are plenty of other entities to consider. Today is the time to start focusing on your credit whether you are trying to build or repair.

There are many things to consider when deciding upon applying for a card. First of all there are two different types, secured and unsecured. A secured card is secured by deposits to your issuing bank. To use one of these a deposit must be made from $50 or higher. After you have made a deposit then a credit line up to 100% of your deposit will be issued. In other words you can only spend what you deposit and in some cases not even 100%. Unsecured cards are the ones you may be familiar with and they are the complete opposite. These are initially issued with a set credit line that may be used once the account is activated.

Understanding the different terms associated with these cards will determine how well you manage your credit in the future. Terms such as; APR and finance charge are very important to the charges on an account. APR which is short for annual percentage rate is a yearly rate of interest that has fees that apply to your loan. APRs are different based upon issuer's and credit. You want good credit to be able to get a loan on a home, but you also need it for a good rate on a credit card. Finance charges are comprised of fees and other charges.

If a user does not carry a balance then the card issuer offers a grace period. A grace period is interest free and is the time between the billing and transaction date. If a balance is carried then there will be no grace period. Minimum payment is the minimum amount that has to be paid to have a current account. Not paying the minimum can cause your account to go into default and extra fees may be applied to your account. It is always best to pay extra then your minimum payment every month.

There are late fees and over the limit fees which apply to every account. Late fees are accrued when you pay after your due date and can range from $20 up. Over the limit fees apply when your account balance goes over your credit limit. These fees are at average $35. Make sure to pay your bill on time and to stay below your limit. In other words always steer clear of these fees.

Credit can be a blessing and can be a curse. Knowing what everything means beforehand will save you a lot of money in the long run. Stay away from high APRs and finance charges. Pay all bills on time and pay more than the minimum. Appreciate credit while staying away from all of the red signs.