Dissecting the Fine Prints

By Leni Parrish on December 12, 2010

Credit card applications are always accompanied with a very long one to two-page credit card terms and conditions. People find them a little boring because they are full of credit jargon. It should be understood that it is one of the credit companies’ tactics to get a customer get hooked up with the offers and wouldn’t mind reading the tiny text found along with the credit card application. But in order to sum it up, here are usually the basic terms you should read about.

Annual fees are service fees charged to customers for using an account. These fees can be usually high and if you have applied for a rewards credit card, you better make sure that the benefits are greater than the annual fees.

Grace Period is the next term to know about. Regular credit cards have usual grace period of 20 to 30 days. This is the time period allowed to you by credit card companies to come up with an amount to cover the amount due in your bill. If you pay beyond the grace period, you will be charged an interest. So if you make a series of unpaid amounts, the interest charge will grow. If you see that you don’t see a grace period written somewhere in the fine print, it means that the interest is going to be charged instantly upon purchase.

Another term you should look for are the introductory rates. For instance a low interest credit card will start with a zero percent offered rate for the first twelve months of account use. After that, the credit card will go on its normal interest. But there can also be times when credit card companies change their offers or even cancel them if you make even a single payment as early as your second month. This is a typical “gotcha” in fine prints.

Penalty Rate is slightly different with interest rates. Interest rates are charged to the existing balance, while penalty rate is a rate applied if you make a late payment. If your APR is 6 – 12%, your penalty rate may come around above 20%. But if you get to pay on time again, the credit card company will get back your normal APR again.

These are just a few of the big words in a fine print. If you avoid this terms, you might be calling your credit card company complaining later about a huge amount in your bill. The company will be telling you that the charge is in their terms and conditions and you have agreed to it by applying for the card. So if you don’t want late realizations about should have read the pages, better start juggling your credit vocabulary now.

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