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Credit Card Terms and Fees

What is APR?

The APR is a measure of the cost of credit, expressed as a yearly rate. It also must be disclosed before you become obligated on the account and on your account statements. The card issuer also must disclose the "periodic rate" — the rate applied to your outstanding balance to figure the finance charge for each billing period. Some credit card plans allow the issuer to change your APR when interest rates or other economic indicators — called indexes — change. Because the rate change is linked to the index's performance, these plans are called "variable rate" programs. Rate changes raise or lower the finance charge on your account. If you're considering a variable rate card, the issuer must also provide various information that discloses to you:

1 .When the rate may change
2 .How the rate is determined
3. Which index is used.
4. What additional amount, the "margin," is added to determine your new rate. 
5. About any limitations on how much and how often your rate may change.

 

What is Grace Period?
A free period where no finance charges accrue, also known as a "grace period." A grace period lets you avoid finance charges by paying your balance in full before the due date. Knowing whether a card gives you a grace period is especially important if you plan to pay your account in full each month. Without a grace period, the card issuer may impose a finance charge from the date you use your card or from the date each transaction is posted to your account. If your card includes a grace period, the issuer should mail your bill at least 14 days before the due date so you'll have enough time to pay.

What is Finance Charge?
Finance charge is a fee charged (interest) by the issuer of a credit card beyond the grace period. It is charged if you choose to pay for purchases or cash advances over time. It is important to know what method the issuer uses to calculate your finance charge. This can make a big difference in how much of a finance charge you'll pay over time. Finance charges are regulated by state and Federal law. The lower the finance charge, the less you will ultimately pay for a purchase over time. 

How is Finance Charge calculated?
Examples of balance computation methods include the following:
- Average Daily Balance.
This is the most common calculation method. It credits your account from the day payment is received by the issuer. To figure the balance due, the issuer totals the beginning balance for each day in the billing period and subtracts any credits made to your account that day. While new purchases may or may not be added to the balance, depending on your plan, cash advances typically are included. The resulting daily balances are added for the billing cycle. The total is then divided by the number of days in the billing period to get the "average daily balance."
- Adjusted Balance.
This is usually the most advantageous method for card holders. Your balance is determined by subtracting payments or credits received during the current billing period from the balance at the end of the previous billing period. Purchases made during the billing period are not included. This method gives you until the end of the billing cycle to pay a portion of your balance to avoid the interest charges on that amount. Some creditors exclude prior, unpaid finance charges from the previous balance.
- Previous Balance.
This is the amount you owed at the end of the previous billing period. Payments, credits and new purchases during the current billing period are not included. Some creditors also exclude unpaid finance charges.
- Two-cycle Balances.
Issuers sometimes use various methods to calculate your balance that make use of your last two month’s account activity. Read your agreement carefully to find out if your issuer uses this approach and, if so, what specific two-cycle method is used.

What are Annual Fees.
Most issuers charge annual membership or participation fees. These fees often range from $25 to $50 up to $100. Gold or Platinum cards often charge up to $75 and sometimes up to several hundred dollars. Some cards charge monthly fees, some charge a monthly fee whether or not you use the card. Read your agreement before you accept a card! Transaction Fees and Other Charges. A card may include other costs. Some issuers charge a fee if you use the card to get a cash advance, make a late payment, or exceed your credit limit.

What is a Secured card? 
A Secured card means that a security deposit account is needed to secure your credit card. The security deposit amount will equal your credit limit. There is nothing on the card that indicates it is a secured card, it can be used exactly the same as an unsecured card. A secured card offers all the convenience of an unsecured major credit card. Using the credit card does not access your deposit, thus the money remains untouched in the security deposit as long as your secured credit card account is open. A secured card can be one of the best tools for starting or rebuilding a favorable credit history.

What values to look for?
Credit terms vary among issuers. When shopping for a card, think about how you plan to use it. If you expect to pay your bills in full each month, the annual fee and other charges may be more important than the periodic rate and the APR, and if there is a grace period for purchases. If you use the cash advance feature many cards do not permit a grace period for cash advances even if they have a grace period for purchases. It may still be wise to consider the APR and balance computation method. Also, if you plan to pay for purchases over time, the APR and the balance computation method are definitely major considerations.

What to do when I lose my card?
If you lose your credit or charge cards or if you realize they've been lost or stolen, immediately call the issuer. Many companies have toll-free numbers and 24-hour service to deal with such emergencies. If you report the loss before the card is used, you can’t be held responsible for any unauthorized charges. If a thief uses your card before you report it missing, the most you could usually owe for unauthorized charges is $50.
If you suspect fraud, you may be asked to sign a statement under oath that you did not make the purchase in question. 

What rights do I have?
Federal law protects your use of credit cards.
Prompt Credit for Payment.
An issuer must credit your account the day payment is received. The exceptions are if the payment is not made according to the creditor’s requirements, or the delay in crediting your account won’t result in a charge.
Refunds of Credit Balances. When you make a return or pay more than the total balance at present, you can keep the credit on your account or write your issuer for a refund — if it’s more than a dollar. If a credit stays on your account for more than six months, the issuer usually make a good faith effort to send you a refund.
Errors on Your Bill.
Issuers must follow rules for promptly correcting billing errors. You should get a statement outlining these rules when you open an account and once a year. In fact, many issuers include a summary of these rights on the back of your bill.
If you find a mistake on your bill, you can dispute the charge and withhold payment on that amount while the charge is being investigated. The error might be a charge for the wrong amount, for something you didn’t accept, or for an item that wasn’t delivered as agreed. Of course, you still have to pay any part of the bill that’s not in dispute, including finance and other charges.
If you decide to dispute a charge:
Write to the creditor at the address indicated on your statement for "billing inquiries." Include your name, address, account number, and a description of the error. 
Send your letter soon. I suggest sending it return receipt to protect your rights! It should reach the creditor within 30 days after the first bill containing the error was mailed to you. 
The creditor should acknowledge your complaint in writing within 30 days of receipt, unless the problem has been resolved. At the latest, the dispute must be resolved within two billing cycles, but not more than 90 days.

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