The Bright Life > Credit Cards

The 9 terms you must know in all that Credit card mumbo jumbo!

Everything you need to know about Credit card speak - in 3 mins!
June 2, 2020
Avi Patchava
President and Co-Founder, Bright Money
Avi Patchava, Varun Modi, Amit Bendale, Avinash Ramakanth, Deepak Thakkar
Published on December 11, 2019

Credit cards are pretty cool! They can be a fantastic luxury that give us the freedom to make purchases fast and simply, without cash.

As with all good things in life, there are ‘gotchas’ to watch out for. If not handled smoothly, credit cards can damage your financial health, and have you gasping for air in a mountain of card debt.

There is a lot of financial lingo to warp your head around. Statements are complicated long documents, with a mish mash of terms and numbers. And then there’s all the math you have to do to really understand what is going on with the interest fees!

Well, we are here to help! Here is your Bright Life guide to getting on top of all key terms so you can read your credit card statements like a children’s nursery book.

  1. Annual percentage rate (APR):
    Credit card companies charge interest fees on the balances you carry on your card. You may avoid interest charges if you pay your cards in full each month. However, if you pay a partial amount and opt to carry balances for more than a month, you are charged an interest rate, which is pre-set, known as Annual Percentage Rate. The higher the APR, the more you will pay in interest costs

    You can learn more details about APRs right here
  2. Balance transfer:
    A balance transfer means being able to move some or all of your balance from one credit card to another new card. Some Credit card companies offer promotional rates with 0% APR on the some or all of the balance you transferred, applicable for a limited time (e.gl, 6 months - 12 months). Balance transfers give you more time to pay-off your debt by delaying the build-up of interest costs. Typically, balances cannot be transferred between cards from the same bank. Also, they are limited to be as large as the available credit on the receiving card, but also be lower than this. Be aware that balance transfer offers can come with a fixed fee for making the transfer - they are not completely without a cost.
  3. Credit balance:
    The Balance is the amount of money you owe to your credit card company. It will change month-on-month, depending on what you spend on your card and whether you pay your card bill in full or in part, or just the minimums. The Balance figure includes the purchases you make this month, last month’s carried over balances, the interest fees you have accumulated, and any fees for: late payments, foreign transaction fees, cash advances or balance transfer fees.
  4. Grace period:
    This is the time between the statement date and the payment due date, and is determined by the credit card issuer. Users get a grace period between 17 and 30 days as an interest-free period. Sometimes, the grace period may not apply unless you meet certain conditions - specific to the card, bank or your financial situation. For example, you might not get a grace period unless you have paid the balances by the due date for 2 months in a row.
  5. Cash advance:
    When you withdraw cash from your credit card account, it is known as a cash advance. Credit card companies typically limit the amount of money you can withdraw to a portion of your total credit limit and charge high interest rates and fees on this withdrawal. So cash advances are super costly. Generally try to avoid these.
  6. Late fee payments:
    If you miss a payment date, you will be charged a late fee. Late fees can clock in at $30 to $40 per incident, even up to $60! You can avoid late fees by connecting to Bright which will ensure you pay on time every month, and track your due dates for you.
  7. Revolving credit:
    A form of credit agreement that allows you to pay all or part of the outstanding balance on a line of credit, or credit card. As the balance is paid off, it becomes available again to use for another purchase or a cash advance.
  8. Credit score:
    A three-digit number that represents your “creditworthiness”. The most common type of credit score is a FICO Score, and scores range from 300 to 850. The higher your credit score, the more access you will get to new and cheaper credit products.
  9. Reward points:
    All credit card companies offer incentive based programs that give cardholders rewards for using their credit card. You collect reward points every time you charge a purchase to your card. You can usually redeem these points in merchandise, travel or cash, depending on details of the program.

That Bottom line...

Credit cards are convenient and a great tool. However they have ‘gotchas’. Get that little bit of knowledge so you understand what is going on.. Mostly people opt for credit cards without the right information on how to use them well. Getting that clarity, will help have the best experience with your cards: the right money decisions and staying on top of your credit card debt.

The Bright app helps you with all the tough stuff in managing your credit cards:

Sources and other great references:

https://www.citi.com/credit-cards/knowledge-center/citi-articles/citi.action?ID=credit-card-terms

https://www.cnbc.com/select/common-credit-card-terms/

Avi Patchava
President and Co-Founder, Bright Money

Your simple guide to reading a Credit Card Statement.

This is 3 minutes of your time put to great use - get on top of all the terms, figures and percentages in those credit card statements.

May 3, 2020

Special tactics to avoid paying high credit card interest

Save thousands of wasted dollars from high credit card interest by just following these 3 approaches.

April 11, 2020