Understanding Credit Card Terms Credit-card terminology is complex. This terminology is not often used in daily conversation. However, if your goal is to control your credit card debts, you must be familiar with the terminology.https://youtu.be/mU7phyCX0jU

Here’s an overview.

  • Annual Fee— The annual fee that issuers charge for the privileges or perks of using their cards. Sometimes called a membership or a participation fee. The annual fees for some services can be quite costly. However, you will have to decide if they are worth it.
  • Annual percent rate (APR)–The yearly interest, including the costs and fees paid for the loan. This equals the periodic rate multiplied times the number of the billing period in a year. Different APRs can be shown for cash advances, balance transfers, and bonus offers.
  • Average daily bill — Calculated simply by adding each day’s account and dividing by the number of a billing cycle. The card’s periodic rate is divided by 12 to multiply the result.
  • Transfer balance – Moving an unpaid amount from one credit to another card is often done by searching for low-interest rates.
  • Credit limit — The maximum amount of money you can borrow from your card. Some issuers will refuse to accept charges above the limit. Others may approve them but charge an extra fee.
  • Finance charge – Charge for using credit cards and carrying debt.
  • Grace time — This is the interest-free period for zero-balance cardholders that runs from the transaction date to the billing date. Some card issuers may not offer it.
  • Late fee — This is the fee charged by the card company for missing payments. It can sometimes be as high as $35 each time.
  • Minimum payments — This minimum payment you must make on time to keep your account in good standing. Usually equals 2% of the outstanding balance.
  • Over limit charge — This is the fee

Personal loans vs. Credit cards

Personal loans and credit cards allow you to borrow funds. Both offer many of the standard credit provisions. In loan and credit card agreements, you will usually find funds from a lender at an agreed interest rate. Monthly payments include principal, interest, late fees, amount limits, underwriting requirements, late fees, and penalties. You can have problems accessing loans, finding housing, or getting jobs if you don’t manage either type of credit.

Beyond the similarities between credit cards and personal loans, there are key differences like repayment terms. Let’s look at the differences between them and discuss the pros and cons of each.

KEY TOY TAKEAWAYS

  • Personal loans provide borrowed funds in one lump amount with lower interest rates. They must, however, be repaid over a fixed period.
  • Credit cards allow you to borrow funds for as long the account is in good standing.
  • A credit score is a key to determining whether terms and approvals are granted for credit cards and personal loans.
  • Various terms and conditions can be used to structure personal loans and credit card agreements.

2 Tips to Lower Credit Card Debt

A three-pronged approach is required to get rid of credit card debt. It involves changing spending habits, improving savings habits, and taking a serious look at a debt-elimination program.

In June, credit card balances had an average interest rate of 16.01%. It’s a very favorable rate historically. However, it’s enormous when the Federal Reserve intends to keep lending rates to banks at almost zero through 2022. 30-year Mortgage rates are held at close 3%. Unsecured personal loans start at 6%.

If you are the average balance cardholder, you will be unable to purchase a house, save enough for college, make a nest egg for retirement, invest in your future, or handle daily expenses.

Continue to Pay Credit Card Bills on-Time.

Start your plan to reduce your credit card debt. Your main goal is to pay your bills on time. It’s not enough to pay a few credit card bills. All bills, all the time.

You may not have read the fine print on your credit card agreement. This gives the issuer a lot of ammunition to make your life difficult with one late payment. You can be hit with higher interest rates, late fees, and credit limit reductions and damage your credit score through reports to the Big Three (Experian TransAmerica, Equifax).

The bottom line does DON’T BE LATE.

Practice Responsible Budgeting

Once you’ve got your financial schedule in place, so you won’t miss making the minimum monthly payments on time every month, you can begin to foster financial responsibility. Live within your means and find ways to reduce expenses.

You need to evaluate your current earnings and spending habits. You might also need to make adjustments.

  • Manage your credit responsibly. If you are thinking about putting money on a card, but you cannot repay it in three months, reconsider.
  • Make a budget and stick with it. Failure to set a monthly budget is a recipe for getting overwhelmed by debt. It might be helpful to track your purchases.
  • Don’t impulse buy. A handful of impulse buys each month can easily ruin a budget. If you need assistance sticking to a shopping schedule, Do not use credit cards and spend what is available.
  • Limit your indulgences — Don’t go to the coffee shop; bring a mug. Your fashion instinct will not be triggered by magazine covers, popup advertising, or shop windows.
  • Look at your bills and see if there is a way to reduce the amount of cable, internet, or streaming options. Reexamine all clauses on your insurance policies.
  • Shop for groceries – Wait for sales and then use coupons. Try to find cheaper grocery store brands.

CONCLUSION. – Are You Ready to Pay Off Your Credit Card Debt? Excellent. First, don’t set yourself up to fail. Instead, find a SMART Strategy that is Specific, Measurable, and Attainable. It should be realistic, achievable, realistic, and time-bound.

Next, put reminders of the ultimate goal in prominent places. A photo of your next home. This river cruise in Europe. The dream college for the kids. You must confront the larger ambition every time you’re tempted with charging to stay on track.

Now you need to create a strategy. Some of the most successful strategies are the debt snowball (paying more than the minimum), the debt avalanche, or automation.

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