Credit cards can be a great tool if you use it for the right reasons and make your repayments on time each month. Unfortunately for most people this isn’t the case and they use it for all the wrong reasons and have end up having debts on numerous cards.
Every credit card should come with a booklet, a policy document and a product disclosure statement which outlines the terms and conditions and finer details about your card. If you are like most people and throw this information in the bin then this post is for you. Below are some credit card terms or meaning that you need to know. (I strongly suggest you read the PDS and information booklet that in most likely in the bin before using a credit card, you should be able to find this information online).
- Credit card– A plastic card that gives you access to money the bank has agreed to lend you for a certain period of time.
- Credit limit – The maximum amount a bank will lend you under a credit contract.
- Cash advance– If you use your card to either withdraw cash from a credit card using an ATM or via a bank withdrawal and it’s considered a cash loan from the bank. The interest rate on cash advances is always higher than the normal interest rate on purchases so its best if you avoid doing this
- Interest-free period– The days where you don’t have to pay interest on your credit card purchases. Interest-free periods usually start on the first day of your billing cycle, not when you make a purchase. Most banks will give up to 44 days or 55 days of interest fee credit card use. But it doesn’t mean every purchase you make is interest-free for that length of time. It depends on when you make each purchase. In other words, the 44 or 55 days is made up of the monthly statement period (approximately 30 days) plus the time we give you to pay your statement balance. This is either 14 or 25 days from the last day of the statement period, depending on whether your card has 44 days or 55 days interest-free.
- Minimum payment due – This is lowest amount of money you can repay against your credit card balance each month. If you make only the minimum payment each month, you will pay more in interest and it will take you longer to pay off the balance of your card.
- Closing balance– This is the total amount owing on your credit card when we print your statement. If you want to pay off your entire credit card debt for the month, this is the amount. If you pay this amount by the due date each month you will not be charged interest.
