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Terms and Conditions

The Federal Truth in Lending Act requires credit card companies to disclose the terms of the credit card in the cardholder agreement.

Finance Charges

Credit card companies disclose the interest rate in several ways, but the annual percentage rate (APR) is what matters the most.  APR is the amount of interest, transaction fees and other charges that a cardholder will pay per year, expressed as a percentage.  Although the APR is an estimate that varies depending on how many transaction fees a person incur and how large a balance s/he carry, the federal law requires that it be calculated in a standard way.  The APR is not important if there is no balance on credit cards.  But, the APR is crucial if a cardholder does not pay the bill in full each month.

Grace Period

Grace period is the interest-free period of time between the purchase date and the bill due date.  Usually, it is available only to those who do not carry a balance on their credit cards.  If a cardholder pays the bill in full each month, s/he has to make sure there is a grace period to avoid paying interest from the date of purchase.

Annual Fees

If a cardholder pays off the balance each month, a card without an annual fee is preferred.  If a cardholder carry a balance, a card with an annual fee and a low interest rate may be better than a card with no annual fee and high interest rate.

Transaction Fees

Most credit card companies charge fees for cash advances and assess penalties, if the cardholder pays the bill late or go over the credit limit.

Higher Interest Rates for Cash Advances and Late Payments

All credit cards charge higher interest rates for cash advances.  If a cardholder makes late payments, some companies impose a new, higher interest rate.  Some of these interest rates exceed 20%.

Rebates, Free Miles and Other Perks

Many credit cards now allow the cardholders to earn cash back, free airline miles, discounts on goods and services, funds for charity or other bonuses.  Considering the other card terms is recommended, to avoid paying high interest and high annual fees.

Inside Terms and Conditions