Sunday, April 1, 2007

When Choosing a Credit Card

I have just read an article at on what you need to know before applying for a credit card. Well, I think this article needs some explanation.
So, read Credit Card Deal Can Be A Pretty Set Back with me.
Lets start with Credit Terms Required by Law. Truth in Lending basically forces banks to disclose certain credit card information such as
- Finance Charge: the "finance charge" is defined as the cost of credit over the life of the loan, expressed as a dollar amount
- Annual Percentage Rate (APR): the APR is the cost of credit expressed as a percentage.
- Amount Financed: the "amount financed" is also expressed as a dollar amount
- Schedule of Payments: the "schedule of payments" tells you the day of the month, timing, number and dollar amount of payments due over the entire course of the loan
- Total of Payments: the "total of payments" is also expressed as a dollar amount
This information gives the borrower an opportunity to calculate the amount of money they will have to pay back.
For more information on Truth in Lending read Consumer Law: Truth in Lending: What you Must Be Told When Getting a Consumer Loan or Other Consumer Credit
There is also the Consumer Leasing disclosures that can help you compare the cost and terms of one lease with another and with the cost and terms of buying for cash or on credit.
Using a credit card means you are using the so-called 'open-end' credit. So you can use it over and over again till you reach your credit limit. The scheme provided helps you to evaluate the cost of your credit card deal.
Pay attention to the charging methods. They can considerably affect the cost of the credit deal, even for the same pattern of purchases and payments. I would go for the adjusted balance method as the most convenient for the borrower.
Anyway, when choosing a credit card you must consider all the terms and make sure that they will allow you to pay your credit back.

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