When something is misunderstood the results can be catastrophic. Misunderstandings usually come with miscommunication and it could’ve been avoided. If you do not understand your credit card you will end up hating every minute of having it but if you know that understanding something as valuable as your credit card you will always be able to enjoy its benefits. This article will guide you through the basics of a credit card so your credit card can help you.

 

There are common misconceptions about a credit card. The first would be that a credit card rate stays the same. This is not true because as credit card companies watch how you spend and pay your monthly payments they might see that you missed a payment and this, consequently, changes your interest rate. The future might hold more fixed rate companies but for now you need to keep an eye on your modified rates. Another misunderstanding is that you cannot only worry about paying your monthly installments, although this is good and will mean that you are responsible with your card, you need to also watch how much you spend. By maxing out your credit card you automatically loose points on your credit score. Your credit score is important when you are seeking a loan for buying a car etc. Also keep in mind that you do not need to give your ID when you purchase anything, your signature on the back of your card is the most important identification, or rather, the only identification you’ll need. If someone does ask you for your ID know that you are subject to fraud.

 

Don’t worry if the name is a bit scary but it can be explained in simple terms. The main differences are that APR and EAR are different terms for interest rates. APR is the Annual Percentage Rate. EAR is the ‘effective’ interest rate. EAR also does not have one-time changes such as late fees. The differences extends further than this and it might seem trivial now but if you do proper research it’ll make a huge different to your pockets at the end of the year in terms of your credit cards.

 

Doing your homework is vital before getting a credit card. You need to know what the status is of your finances and if you really need a credit card. This may be the case as today a credit card is part of living but you need to know how to spend wisely and be pro active in knowing the inter-workings of that plastic device that seems so simple. 

 

 

 

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