Bank Credit Card
From Financial Literacy Wiki
Bank Credit Card is offered to individuals by banks in conjunction with credit card companies such as Visa ad MasterCard. It functions like a charge card except that it does not require cardholders to pay the bill in full each month. Credit card holders can make a minimum payment that is a small percentage of the outstanding bill. Bank Credit Card can be used to make payment for purchases at any store that accepts it.
As banks offer different terms and conditions for each credit card, it is important that you shop around for a card that offers the most attractive terms based on your lifestyle and income. Below are some factors to look at when choosing a credit card:
- Joining Fees, if any
- Annual Fees -
- Availability of Supplementary Cards and their fees - Supplementary cards are usually for family members who share the same lifestyle as you and you can use it to monitor and group purchases together to gain more perks.
- Interest Rate on unpaid balance
- Late payment penalty
- Spending and Credit Limits
- Interest Free Period
- Minimum monthly payment
- Perks for members
- Amount of cash advance and fees.
Let's look at the finance charges of credit cards.
Contents |
Annual Fees
Annual fee is just a subscription fee to be paid annually to continue using the credit card.
Interest Charges
Interest is charged on credit card balances rolled over beyond the payment due date. The amount of interest charged by banks depends on the interest rate and the way the bank computes the outstanding balance. Most banks charge an interest of 24% per annum on unpaid balance which leads to an effective interest rate of 26.82%. Judging from this figure, you can see that it is not advisable to roll over outstanding balance. To know more about how interest charges are calculated for your outstanding balance, please refer to Calculating Interest Charges on Credit Cards Balance.
Late Charges
Late charges will be imposed on credit cardholders if they fail to make the minimum payment or the bank receive the minimum payment past payment due date. The late charges can range from $2.50 to $35 or 5% of minimum payment.
Charges on Cash Advance
For most credit cards, there is a credit line or cash advance that is offered with it. So if credit cardholders need cash urgently, they can activate the credit line or cash advance from bank branches or ATMs. There is a limit to how much the credit cardholders can have for cash advances. Most banks charge a flat fee of 3% on the cash amount and 2% monthly interest on the cash advance.
Other Articles
- Using Credit Cards Wisely
- Understanding the Credit Card Monthly Statement
- Guarding Against Credit Card Fraud
