Getting a credit card offer in the mail can be tempting, but don’t’ accept all offers you get in the mail. Some credit cards come with less than appealing fees and requirements that would turn you off if you knew about them. It is easy to get sidetracked with the information the credit card offers want you to see and not notice other terms. In this article, we are going to talk about five details you need to know about credit card offers.
1. There Are Secured and Unsecured Credit Cards
When you get a credit card offer, whether it is a 0% APR credit card or some other type of reward for getting the credit card, you need to make sure what type of credit card it is. It could be a secured credit card or an unsecured credit card.
The difference between a secured and unsecured credit card is as follows:
When you get a secured credit card, that means you are getting a card that is backed by a cash deposit you have to supply before you use it. Most of the time, the amount of your deposit the limit of the card. Depending on the card, you may be able to add money to the deposit amount so you can increase the credit limit or you may earn more of a limit without backing funds if you show you have a good payment history.
The most popular credit cards are unsecured, and you do not have to back it up with funds. You are granted a credit line free of charge, and you’ll only have to pay interest or annual fees that are attached to the card. If you don’t have good credit, unsecured credit cards usually come with heavy fees so make sure you read the terms of service. You don’t want to get hit with unexpected fees that weren’t clear in the conditions of the card member agreement.
2. Grace Periods and How They Work
A grace period is a time period a credit card issuer allows for you to pay new charges without paying interest on the new balance. A card’s grace period runs from the end of a billing cycle to the next payment due date. When you pay off the new balance in full before your payment is due, you do not have to pay additional finance charges or interest.
If you purchase something for $200 using your credit card on August 2, and your billing cycle ends on August 15 with a payment due date of Sept 7, and you don’t have an unpaid balance and pay the $200 on or before Sept 7, you will have a balance of zero. The zero balance will remain as long as there are no other charges or fees that come up during the billing period.
3. How Credit Card Interest Is Calculated
It is important that you know your APR so that you can figure out how much interest you are going to be paying on your balance each day. You can do this by dividing your APR by 365. At the end of each day, the issuer of your card multiples your current balance by the daily rate to come up with the daily interest charge. The charge is then compounded by adding the charge to your balance the next day. The process above is why it can take a long time to pay off your credit card balance if you are only paying your minimum payment.
4. How Minimum Payments are Calculated
If you understand how the minimum payments are calculated, it is likely to help you make better decisions on the amount of money you pay each month.
The minimum payment due on your account is calculated as a percentage of your total current balance, or as all interest plus one percent of the principle. Card issuers also have a basement for their minimum payment which is a fixed dollar amount that the minimum payment cannot be beneath. The more you pay over your minimum payment, the less interest you will have to pay and the sooner you will pay off your balance.
5. Credit Cards Affect Your Credit Score
Credit cards affect your credit score and will either help or hinder your credit. If you aren’t sure how getting a new credit card is going to affect your credit, here are a few things you should consider.
When you add a new account, you are decreasing the average age of your credit which is a considerable part of your credit score. It is an opportunity for you to show you are responsible with credit and increase your credit score. On the other hand, if you do not use your credit line wisely, you could hurt your credit score.
Now that you know more about credit cards, how they work and what to look for when you get credit card offers in the mail, you can make wiser decisions on which card is going to be a good choice for you. Depending on how you are going to be using your card, one card might be better for you than another card. Make a list of criteria you are looking for in a card and check the credit card offers that come to you to see if any of them match.