Your Credit Card Basics

Types of Cards

There are two types of cards being issued: revolving and paid in full. A revolving credit card requires a minimum payment of 1.5% to 2.5% of the outstanding balance each month whereas the paid in full card, like American Express, is literally paid in full each month.

Both of these cards could also be rewards cards, which contain perks such as airline miles and points towards merchandise. Rewards are typically based on how much you charge not your outstanding balance.

A secured card is for consumers with credit problems. These allow you to deposit money and then "charge" goods and services, sometimes up to the full amount deposited. However, these cards usually have ridiculous fees attached to them.


The new purchase APR, or annual percentage rate, is the interest rate at which you will be charged for new purchases. Your interest rate can be fixed or variable if it is based on the prime rate.

There is also a different (and higher) APR for cash advances and transactions since this is considered a convenience.

And don’t forget the introductory APR, which is a lower rate for a short time given to new cardholders. You need to know what the introductory rate is for; either new purchases, cash advances and/or balance transfers.

If you don’t pay off the balance, interest accrued will be calculated from the day of purchase. This accrued interest will either be based on the unpaid balance if not paid in full or just the unpaid portion, plus each new purchase thereafter.


Terms refer to the time period of the introductory APR or the balance transfer APR.

Grace Period

The grace period is the amount of time between when the billing cycle closes and when your payment is due. Usually this is 20 to 30 days.

For instance, my billing cycle ends of January 20th and my bill is due on February 14th. The grace period is 25 days.

Cash advances do NOT have grace periods and interest accrues from the minute the cash is spit out of the ATM.


Of all credit cards fees, the annual fee is the most important since you shouldn’t have one at all! An annual fee is a nominal fee charged every year just for the privilege of using the card.

If your payment is late, a late payment fee will be charged to the card.

If you go over the card’s charge limit, you will be assessed an over-the-limit fee.

Cash advances have extra fees attached to them. Typically, a fee of 2% of the amount advanced is charged. However, this has a minimum charge of $10.

A penalty fee is sometimes charged if you cancel a card.

Schumer Box

No one knows its name, but everyone knows what it is.

Yes, that nifty little box on all credit card offers. It’s formatted identically no matter who the issuer is.

This is a legal requirement; perhaps named for the person who sued to have this knowledge made public.

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