5 Tips to get most out of your credit card

1. Pay on time

Reporting on your credit card on time helps you avoid late fees and interest rates of the penalty applied to your account, and helps you maintain a good credit record. A good credit score leads to a higher credit, which allows you to benefit from interest rates lower. Know the date your payment is due. If your bill is due at an inconvenient time of the month Pay your credit card on time helps you avoid late fees and a penalty rate applied to your account, and helps you maintain a good credit . A good credit score leads to a higher credit, making you eligible for lower interest rate. Know the date your payment is due. If your bill is payable at the wrong time of the month – for example when they expire on 10 and you have paid the 15 – contact your card company credit report to see if they will change your billing cycle based on your cash flow.

2.Stay below your credit limit.

If you exceed your credit limit on your card, your card company credit for a fee and raise your rate to a higher penalty. To avoid this, a record of your expenses or check your balance online. Also note that some retailers (eg hotel and rental car) put a “hold” on your credit card according to their estimate of how much you charge. This may reduce your available credit before the last payment has been processed. See credit block.

3.Avoid unnecessary costs.

Credit card companies not only to late payments and over limit fees informal, but charges for cash advances, transferred balances, and with a payment in return. Some companies charge when you pay your bill by phone. Pay attention to transactions that led to these costs. If you take a cash advance so you do not have enough for half of cash advances to take – and suffer half price – later in the Mon Read your card agreement credit to learn more about charges your free credit card.

4.Pay more than the minimum payment.

If you can not pay your balance in full each month, try to pay as much of all that you can. Over time, you pay less in interest payments – money you can spend on other things, and you pay your previous balance. See Federal Reserve credit card repayment calculator to determine the repayment possible.

5.Watch for changes in the terms of your account.

Companies review credit card terms and conditions of your account. They will advance announcements on changes in costs, interest, billing and other functions. Reading this change “in terms” notice, you can decide if you want how you change the map. For example, an advance fee increase cash, you may decide to use another card for cash advances. If you have a card with a variable rate or you have an introductory rate ends, you must know that the card companies credit are not required to give you a message about increasing your rates. Interest rates are shown on your monthly bill. Read your bill carefully and note any change .– For example, if it is due to the 10th and you are paid 15 – contact your card company credit report to see if they will change your billing cycle depending on your cash flow.

Understanding Credit Card Terms (Glossary)

Understanding credit card terms is a good way to stay one step ahead. If you can read a credit card application and understand the terms of agreement on your card – you’ll be in better shape to use your cards responsibly and avoid falling into the credit card debt trap. Here’s a glossary of the most common credit card terms to help you with your credit card education:

Adjusted Balance method – this is a formula used by many card issuers to calculate the amount of your monthly payment. Payments you made to the credit card account during the month is subtracted from the balance, and finance charges are added on to get the adjusted balance.

Annual fee – some credit card companies charge cardholders a once-per-year fee to use the card. It may mean the card offers great rewards or travel benefits, or it may mean you’ve got a credit card for people with poor credit.

APR – the annual percentage rate is the amount of interest a credit card balance is charged, annually. If there is no balance on the card, then there is no interest charge.

Billing Cycle – the length of time between billing statements, which can vary from one month to the next. The fluctuations in billing cycles can change due dates.

Charge back – a transaction that gets returned due to a consumer disputing a purchase made from a merchant; or due to the purchase being noncompliant with the merchant account rules.

Credit line – sometimes referred to as your available credit, the credit line is the amount your credit card company gives you to borrow. When you spend all of it, you’ve reached your total available credit and can’t use your credit card until you pay down the balance.

Finance charges – the total cost of using your credit card, expressed in dollars instead of percentages, including the interest and other fees.

Fixed interest rate – credit cards with fixed interest rates don’t fluctuate based on economic conditions. The rate CAN be changed by the credit card company however, if they provide 15 days notice to the cardholder of the change.

Grace period – a specific period of time when you could repay your credit card balance without having to pay interest or other charges. Not all credit cards offer a grace period.
Minimum payment – shown on your credit card statement, the minimum payment is the least amount of money you can send to your credit card company before the due date, to avoid having to pay a late fee for not making the payment.

Monthly periodic rate – part of the formula used to compute someone’s credit card bill. It’s multiplied by the amount of the outstanding credit card balance to get the interest rate charge for the billing cycle.

Secured credit cards – require the cardholder to give up collateral in exchange for receiving and using the secured credit card. Usually a secured credit card requires a deposit in the amount of the credit limit.

Universal default – a clause that states if a cardholder makes their payment late to a creditor, that credit card company can raise the interest rate on that credit card – and any other credit card accounts the individual has that participates under the universal default, can increase interest rates, too. So one late payment can result in all of your credit card accounts getting interest rate hikes.

Variable interest rate – some credit cards have variable interest rates. Which means they change when economic indicators change. Sometimes this is called a floating rate.

Skip the Refund and Have More Money For Credit Card Bills

Sure, it’s great to get a big, fat tax refund all at once every year – but if you’re struggling to pay your bills and credit card debt year round you should make some changes. Many people leave their tax withholdings set up purposely to get the refund after filing their tax return – sort of like a savings account or vacation fund. The problem is you’re giving the IRS a tax-free loan, that could better be put to use paying your debts throughout the course of the year.

Surely there is no one who would prefer to PAY the IRS at tax time, so it’s better to get the refund. With some careful adjustments, however, you can reduce the size of the refund and see more in your check throughout the year (without danger of having to pay at tax time).

Visit your human resources or accounting department at your place of employment. Ask to look at your w-4 to see what your withholdings are. If you’re getting a large refund, you can increase the number of withholding allowances you claim. The payroll people should be able to help you find the break-even point; and show you how much more you would get in each paycheck throughout the year rather than waiting to get it all at tax time.

You have a few choices as far as what to do with the extra money changing your withholdings would cause in your paycheck:

Automatic debt repayment: If you are looking to pay off credit card bills or other debts, the best thing you could do is set up automatic payments to your highest interest account each pay period, for the amount of extra money that will be in your paycheck. You won’t miss the money since you hadn’t been receiving it before, but those small extra payments will do wonders to paying off the credit card bill faster. If you do this, you will want to continue sending your normal monthly payment as well.

Automatic savings: If you’re not in very much debt, or can get a high interest rate on savings (higher than the interest you pay towards debt), you may decide it makes more sense to put the extra money into a savings account. Each pay period, automatically transfer the extra money into the savings account of your choice. This way, you earn interest on the money all year round instead of letting the IRS hold on to it for you interest-free. Also, if you should miscalculate your break-even point with your taxes the first time you make a change to your withholdings, you will have the money in your savings account available to pay for it.

If you’re not convinced that it’s more valuable to receive the money throughout the year rather than in one lump sum at tax time, leave everything as it is except for what you do with the refund when you get it! Often, people use the refund to take a vacation, make a down payment on a vehicle, or deposit it into their bank accounts to slowly whittle away on purchases here and there. A better method, for people in debt, is to take the refund and apply it to your highest interest debt, to pay it down faster. Do this every year until you are debt free; and then you can use the refund for the fun purchases – like vacations or cars, without guilt!

How Credit Card APR is Calculated

If you’ve had a credit card for more than a month, you probably have noticed that your purchases are charged interest. For cards without a grace period, purchases are charged interest from the moment the purchase is made; while credit cards with a grace period (typically 21 days or so) at least give you some time to pay off the balance before they begin charging interest on the remaining balance. What you may not fully understand is the calculation of APR and how it includes the finance charges.

Every Credit Card Company Uses a Different Method of Calculation

There is no one-size-fits-all program for calculating your APR. By law, you have to receive a written statement from your credit card issuer regarding how much you are charged in interest, and the method they’re using to calculate the interest. It’s typically written in a light-weight paper booklet that you receive when you first receive the card – and then receive again with every change to the terms of your card.

APR Calculation May be Fixed or Variable

If you are one of the lucky individuals to have gotten a fixed interest rate credit card that has actually remained fixed throughout all of the economic downturns, your interest rate is whatever it was stated to be when you opened the account. Other credit cards charge a variable interest rate which is based on the prime rate, plus anywhere from 2 to 7% more – a number selected by the bank and often a result of your personal credit score and payment history. The variable rate tends to fluctuate greatly, depending on circumstances of the economy, as well.

Outstanding Balances Charged the Periodic Rate

Your annual percentage rate (APR) is divided by the number of billing periods in a year (typically, 12 months). A 24% APR is divided by 12 months to give you a periodic rate of 2%. This periodic rate is multiplied by your outstanding balance to get the periodic rate for the month. It’s not as simple as taking your full balance owed on the credit card and multiplying it by the periodic percentage rate though. There are a number of methods used to determine how much of your total balance is charged the periodic rate:
• Adjusted Balance: This is one of the ideal methods of calculation, because your balance is adjusted to reflect the payments you made during the billing cycle. It does not increase your balance that will be charged the periodic rate for any purchases made within the same billing cycle. If your balance was $2,200 and you made a payment of $200 during the billing cycle, and charged $140 during the same billing cycle, you will be charged the periodic rate on a $2,000 balance.

•Average Daily Balance: For credit cards using the average daily balance method, the balance is determined by adding the balances on each day of the billing cycle and then dividing them by the number of days in the billing cycle to get the average daily balance on the card. Payments you make are subtracted from the balances and purchases are added.

•Two-Cycle Average Daily Balance: This method doesn’t account for your payments right away, which means if you start making larger payments to reduce your balance, you’re not going to see a big different in the amount you’re paying right away. The account balance on each day of the last two billing cycles are added and divided by the number of days in those two billing cycles.

•Previous Balance: This is figured by applying the periodic rate to the beginning balance at the beginning of the billing cycle. Your purchases and payments made during the same billing cycle will not affect this method’s calculations.

•Ending Balance: The ending balance at the end of the billing cycle is the only thing that matters in this calculation. Your purchases and payments made within the same billing cycle won’t affect this methods calculation, unless it affects the actual balance on the last day of the billing cycle. What’s difficult about this method is that the billing cycles of credit cards are not an exact day each month – many have billing cycles that are “between 20 and 25 days in length” so you will never know which day they are calculating the balance, but you can guess they’re picking a day when the balance is at it’s highest if you’ve just made a payment!

Understanding how your credit card calculates your APR charges is important to selecting a card with the best rates to keep your costs of borrowing money lower. With the upcoming credit card reform, hopefully things will become easier to understand for consumers and more affordable for those who are making their payments on time.

A Plain English Guide to Credit Card Reform

Credit cards are all over the news these days. Are they a good thing or a bad thing? Do credit card companies play by the rules? What’s with all this credit card reform, anyway? If you’re a little overwhelmed by it all, you’re not alone. It’s easy to get lost in all the industry terminology and lose sight of how the upcoming legislation will affect you, the cardholder. So here’s an easy guide to credit card reform and what it will mean for you.

No Universal Default. If you’re late on your utility or mortgage payment (or any other payment that isn’t related to your credit card), credit card issuers will no longer be able to hike up your interest rate as a result.

No Double-Cycle Billing. If you pay off your balance in full, that balance will not be subject to finance charges on your next billing cycle.

Limits on Interest Rate Increases. Card issuers will only be allowed to increase your interest rate if you make a late payment; if you agreed to a variable interest rate; or if the low rate was part of a time-limited promotion. Otherwise, the issuer has to give you 45 days’ warning of a rate hike. You’ll also have 3 billing cycles after the increase to decide whether or not the new terms are agreeable. If not, you can close your account and pay off your balance at the previous interest rate.

Reasonable Due Dates. Lenders will be required to give consumers at least 21 days to pay their bill before it’s considered late. The due date and time will be clearly printed on the credit card statement. Lenders will no longer be able to change due dates and times arbitrarily.

Fair Payment Allocation. Card issuers will be required to apply your payments to higher-interest charges first. For example, your payments would be first applied to a cash advance with 24% interest rather than regular purchases made at 12% interest.

Limits on Over-Limit Fees. Holds placed on the credit card (such as those made when reserving a hotel room or rental car) will no longer push you over your credit limit. Cardholders will also be able to choose whether they want to be able to go over their credit limit and pay the resulting fees, or whether they want their cards to simply be declined when they reach their limit.

An End to Fee-Harvesting Cards. As subprime cardholders will tell you, sometimes the cost to obtain a credit card is higher than the actual credit limit! The reform will put rules in place for credit cards that have high start-up and maintenance costs, including full disclosure of the card’s terms and how much credit will be left after start-up.

More Transparency. Your credit card’s terms must be clearly printed on your monthly statement. Bills will also contain a summary of all the interest and fees you’ve paid in the past year. Credit card offers must tell you the criteria used to determine your interest rate and credit limit. Also, foreign transaction fees must be clearly disclosed before you sign up for a new credit card account.