Hey you’re like a kid on Christmas day when your new credit card arrives in the post. You’re so happy you could almost kiss the postie!
You get out the card and activate it just as quick as you can, but what do you do with the paperwork? File it as you should but without reading the small print?
Oh Oh……….big mistake. Credit card agreements should be studied closely……….a bit like the runners for the Kentucky derby!
Note the ‘Truth in lending Act or TILA’ and May the Force Be with You!
The American government have decreed any entity issuing credit to any type of consumer must disclose various facts to them before any transaction takes place.
‘Disclosure’ provides this information, but you must ensure this helps you make informed and sensible financial decisions.
Sounds complicated but it isn’t and it’s done to protect you. No……not from an Al Gore video but from making financial mistakes!
Thank You Oh Wise People – So Explain More to Me?
If you don’t take a look at the fine print, the chances are the card will cost you a lot more in the long run. Just ask Mussolini?
Let’s Begin With the Most Important of Things – the APR
The annual percentage rate is simply the cost of borrowing in terms of the interest you’ll pay. Any credit card company must tell you what the APR is on balance transfers, defaults and cash advances.
Alongside this there are tiered APR’s charging a higher rate of interest above a set amount, and introductory APR’s which go up after a certain time period. APR’s can be either fixed or variable.
Then There’s the Finance Charge!
Certain cards carry finance charges. For example if your finance charge comes out to $0.50 this month and the minimum finance charge for your card is $1, you will need to pay $1. But if you pay off the balance of your card in full each month then this charge won’t apply. Double check!