Know Your Credit Card





What’s does it all mean? Credit Card jargon made simple!


Every credit agency will give you special offers such as low interest rates or special balance transfers, but it’s hard to know what’s best for your situation and even more importantly, what all these terms actually mean.

 

We’ll explain some of the ‘jargon’ so you’ll be better able to choose a credit card to suit your needs and you won't feel quite like a fish out of water when it comes to deciding the right card for you.

 

 

Term
Meaning
Purchase Rate and Cash Advance Rate

This is the interest rate you pay on the amount you spend each month.

 

The Purchase Rate may be set or variable depending on the institution.

 

The Cash Advance Rate is the amount of interest you pay on cash withdrawals from ATMs for example. This rate is usually higher than the purchase rate.

 
Interest Free Days – Buyer Beware!

This is not as it seems. To take advantage of all your ‘free days’ you would need to do your spending the day after your bank statement is processed.

 

For example, a bank gives you 55 days interest free, but in actual fact, most institutions will give you 25 days interest free after your statement is printed.

 
Special balance transfer

You can transfer the balance of your existing account to the new institution for a reduced interest rate and a short period (usually around 6 months).

 

After this time, the interest rate moves back up to normal

 
Minimum Repayment

You will need to repay you lender a minimal amount each month. This is usually around 2% of your balance or $10-$20.

 

Introductory or Honeymoon Period

 

Everything is rosy - you’ve just got your new card with a reduced interest rate for 6 months, and your annual fee is waived for the first year

 

After the honeymoon, you will pay a higher interest rate and other fees will be payable.

 

If you have a large debt, a honeymoon period may help because it gives time to pay it off at lower interest rate.

 
Reward Programs

Some cards give you access to bonuses and special offers as part of a rewards package.

 

These could range from transfers to Qantas Frequent Flyer points, discounts at overseas motels, concierge services, travel insurance and movie tickets.

 

More often than not, special rewards will only apply to Silver, Gold and Platinum cards while the basic cards will not have a rewards program.

 


Further Research





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