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5 Must-Know Credit Card Terms

It’s no secret that credit card issuers have sneaky ways of charging you interest and fees.

But they do it legally.

Every credit card application is custom built with a set of rules that are agreed to once you submit your application.

Even though you won’t have a say in what fees a credit card issuer can charge, knowing how they operate can save you quite a bit in penalties and interest.

Every credit card application includes five key terms everyone should know.

These areas of the application are often overlooked and misunderstood, which creates headaches for cardholders down the road:

Penalty APR — The penalty APR is applied at the discretion of the credit card issuer, dependent on your account history. If you miss two consecutive payments or continue to have payments returned for nonsufficient funds, you can expect the penalty APR to kick in.

This APR is always higher than your standard APR — and sometimes, much, much higher.

Late Payment Fee — When you don’t pay your account balance on time, expect to receive a late payment fee between $25 and $39. The amount varies from issuer to issuer, but it is clearly explained on your credit card application.

Grace Period — The grace period refers to how long you have before interest begins to accrue on the purchases you make. Some credit cards offer lengthy grace periods of more than 25 days, while others offer none.

It’s important to know how long your grace period is to avoid as much interest as possible.

Over Limit Fee — Even though your credit card has a fixed limit, you can still overdraw it at times. For example, if you spend $990 on your $1,000 credit line, the interest charged to your account could create an over limit fee.

Make sure to give yourself enough of a buffer when interest is applied.

Return Check Fee — Should you make a payment on your credit card that is returned for any reason, expect to receive a $25 or $35 charge applied to your account. This fee could also spark a late payment fee as well as an over limit fee.

Credit card issuers call that the “trifecta.”

The next time you’re filling out a credit card application, remember to be on the lookout for these five terms. You can usually find them in the “terms and conditions” section of the application.

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