Credit cards provide security, convenience, and even rewards based on spending. However, if cardholders don’t manage their cards carefully, they may find themselves facing unwanted consequences like a poor credit score or hidden fees.
Get to know credit cards with these 10 credit terms:
Pros and Cons of Credit
To make the most of your credit cards and maintain a great credit score, it’s essential to understand their pros and cons. Maximize the benefits and minimize unnecessary costs by learning about the advantages and disadvantages of credit.
The main disadvantage to credit card usage is the potential cost in interest and fees. Wise use of credit means understanding those costs and acting accordingly. Keep track of your spending to ensure that you can repay your credit card bill in full when it is due each month.
The True Cost of Credit Card Purchases
If you don't pay off your credit card balance every month, the interest assessed on your account means you may be paying more than you expect. And if you spend beyond your means, the resulting interest and debt can become significant.
See how much extra you might pay on a $1,000 credit card purchase with varying interest rates:
|Total Purchase Amount
This is the balance due on your credit card
|Credit Card APR
This is the annual interest rate on your credit card.
This includes paying just the minimum monthly payment, calculated in this example as $40.
|Number of Months to Pay Off Purchase Amount
This is how long it will take you to pay off the entire balance.
|Total Finance Charge
This is the total amount of money you will pay just in interest.
This is the final amount you will pay for your purchase.