You already know how to use your credit card for purchases. And you may think that’s all you need to know. Actually, you’ll Find it interesting — and helpful — to understand some basics behind credit cards.
You may discover some things you didn’t know, and some new ways to use your card. This brochure will help you make better use of your card and give you information on how to manage your credit wisely.
THE INS & OUTS OF INTEREST CHARGES
Interest is the cost for the convenience of paying for purchases over time. The Annual Percentage Rate (APR) on your account determines how much interest you pay. The higher your APR, the more you will pay in finance charges.
When you make a payment, your dollars go to pay interest first, then your balance. If you’re making just the minimum payment, you’re paying mostly interest. You’ll reduce your balance more quickly if you pay just a little more each month.
PAYING ON TIME
Paying on time is a reflection of your conscientiousness about your obligations. You can avoid paying interest charges on purchases by paying your bill in full each month. Credit card issuers could charge extra fees and increase your APR if your payments are late. Please be sure to read and understand the statement of terms and conditions that arrived with your card.
WHAT A GRACE PERIOD IS
Some credit cards give you an interest-free grace period. That means when you pay your full balance, you incur no finance charges that month.
On the other hand, when you carry a balance to the next billing period, you’ll pay interest based on your daily balance from the original purchase date. Unlike purchases, when you get cash from an ATM or teller, interest is charged from the date you take the cash to the date it is repaid in full.
WHAT A GRACE PERIOD ISN’T
A grace period is NOT a few days past your due date when your payment will be considered on time. If your payment is received even one day past the due date, it’s late. That means late fees and a blemish on your credit rating.
BUILDING A GOOD CREDIT HISTORY
A good credit history is important for your financial future. To build good credit, always pay at least the minimum due, and mail your payment before the due date. Be sure to keep your billing address current to avoid lost statements that cause you to pay late.
KNOWING YOUR LIMIT
Never exceeding your credit line will also help build your credit history and avoid over-the-limit fees. Your credit line is the amount of credit available for you to use for purchases. It’s a revolving line, which means as you make payments, that money becomes available for you to use again.
CREDIT DOESN’T HAVE TO MEAN DEBT
Using your card to pay for things that you know you can afford is the smart way to use credit. But using credit to extend your income—to pay for things you can’t afford—will only increase your debt.
GLOSSARY
APR
A measure of the cost of credit, expressed as a yearly rate. It includes interest and other finance charges.
Available Credit
Your total credit line minus your current balance and any charges the credit card company has authorized, is the amount of credit available to you.
Grace Period
The date by which any credit extended for purchases must be repaid without incurring a finance charge.
Past-Due Amount
Any unpaid minimum payment from prior statements.
Payment-Due Date
The date by which your payments must reach the lender to avoid being late and assessed late charges.
Post Date
The date a transaction was posted to your account.
Revolving Account
A form of credit that allows you to continually borrow against your account, and as you make a payment toward your account that money becomes available for you to use again.
Transaction Date
The actual date when your purchase is made or cash advance is taken.
REMEMBER
· Paying for a purchase over time is a convenient way to use credit.
· Think about why you’re using credit. Is it because it’s just more convenient to pay for it in two or three installments?
· Or, is paying the minimum the only way you can afford it? You might want to consider whether using credit is a good idea for you.
· It’s not a good idea to use a credit card to pay for day-to-day living expenses just to give yourself a little extra pocket money.
· You can reduce your balance more quickly by paying more than the minimum due each month.
Ó Citibank, N.A. 1999
275 Eastland Rd.