What are credit Plans/Terms

Credit card companies keeps pushing hard to get more customers daily by giving “pre-approved” card offers to would be clients through mail. Chances are you’ve gotten one of this offers in your mail in recent days. Such promotion has being in existences long before now. Though getting such card is good to some extent and getting one will be helpful however, you don’t have to rush into getting one without considering the plan terms associated very well.

 There are lots of plan terms that you really need to study very well while shopping for credit card if you are not ready to put yourself in financial prison. These terms affect your overall cost.   In this article we will take a look at some of this credit card plan terms you need to consider before choosing a company to deal with. Get a cup of coffee while we discuss each of terms you need to consider.

Reward Programs

Reward program is term used for marketing strategies used by most banks or issuing banks to get more customers. They designed additional incentives to convince clients to get card from them. There are several types of rewards programs. Most common are free airline miles, cash back from purchases, and instant discounts.

Free Periods

Consider a company that gives “Free period” or grace period over others. Because without free period, the card issuer may impose finance charge from the date you use your card or from the date each transaction is posted to your account.  Free period allow you to pay back your balance in full before due date in other to avoid finance charges and it’s usually mail at least 14 days before the due date, giving you enough time to pay.

 Periodic Rate

Periodic rate of a credit card is another term you have to know about. This is the amount of interest that is charged for a single period of the year. It can fluctuate from month to month.

APR

Another very important term to take note of is APR (Annual Percentage Rate) which is the measure of the cost of credit, expressed as a yearly rate. APR often changes when there is a change in interest rates or other economic indicators. Still companies must disclose this before you open the account and on your account statements.

Preset Credit Limits: some card issuing companies have a preset credit limits on their cards. Receiver can not be able to exceed this credit limit because the issuing company will decline the transaction above limit they place on the card.

Apart from the annual percentage rate, you need to consider how much the issuer’s charges for membership fee. The annual membership or participation fees varies, it’s often between $25 and $100.

You also need to know about method issuers will use in calculating your finance charge if you don’t have a free period, or if you are expected to pay for purchases over time.  Knowing this will help you keep your finance charge low by measuring your buying patterns and paying back on time.