Whether you’re shopping for a new card or getting a handle on an existing one, here are the key terms you need to know to manage your credit cards.
APR – Annual percentage rate
The APR, or annual percentage rate, is the way to compare how much loans cost. It lets you compare the cost of loan products on an “apples-to-apples” basis. Your credit card company must disclose the APR before you agree to the use the card.
To calculate the APR, the interest rate and fees are compared to the amount you borrow and calculated over a one-year period. This allows you to compare the costs of a credit card to a six-month installment loan. It is also why APRs are often different from simple interest rates.
Balance transfer
A balance transfer lets you move an outstanding balance from one credit card to another, sometimes for a fee. The fee normally is a fixed amount or a certain percentage of the amount you transfer.
Credit card companies may offer zero-percent or low-interest balance transfers – for a limited time – to invite you to consolidate your debt on one credit card.
After that, the interest rate on your new credit card may rise, increasing your payment amount.
