chap1_ho3_credit2_solution

chap1_ho3_credit2_solution - Using Cr edit Car ds Choosing...

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Unformatted text preview: Using Cr edit Car ds Choosing and Using Credit Cards Choosing and Using Credit Cards Chances are you've received your share of "pre-approved" credit card offers in the mail, some with low introductory rates and other perks. Many of these solicitations urge you to accept "before the offer expires." Before you accept, shop around to get the best deal. Credit Card Terms A credit card is a form of borrowing that often involves charges. Credit terms and conditions affect your overall cost. So its wise to compare terms and fees before you agree to open a credit or charge card account. The following are some important terms to consider that generally must be disclosed in credit card applications or in solicitations that require know application. You also may want to ask about these terms when you're shopping for a card. Annual Percentage Rate . The ANNUAL PERCENTAGE RATE is a measure of the cost of credit, expressed as a yearly rate. I t 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 ANNUAL PERCENTAGE RATE 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: that the rate may change; and how the rate is determined - which index is used and what additional amount, the "margin," is added to determine your new rate. At the latest, you also must receive information, before you become obligated on the account, about any limitations on how much and how often your rate may change. F ree Period . Also called a "grace period," a free period lets you avoid finance charges by paying your balance in full before the due date. Knowing whether a card gives you a free period is especially important if you plan to pay your account in full each month. Without a free 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 free period, the issuer must mail your bill at least 14 days before the due date so you'll have enough time to pay. 2 Choosing and Using Credit Cards Annual Fees . Most issuers charge annual membership or participation fees. They often range from $25 to $50, sometimes up to $100; "gold" or "platinum" cards often charge up to $75 and sometimes up to several hundred dollars....
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chap1_ho3_credit2_solution - Using Cr edit Car ds Choosing...

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