The grace period is the number of days you have to pay your bill in full without triggering a finance charge. For example, the credit card company may say that you have ?25 days from the statement date, provided you paid your previous balance in full by the due date.? The statement date is given on the bill.



The grace period usually applies only to new purchases. Most credit cards do not give a grace period for cash advances and balance transfers. Instead, interest charges start right away.

If you carried over any part of your balance from the preceding month, you may not have a grace period for new purchases. Instead, you may be charged interest as soon as you make a purchase (in addition to being charged interest on the earlier balance you have not paid off). Look on the credit card application for information about the ?method of computing the balance for purchases? to see if new purchases are included or excluded. Information on methods of computing the balance is in the section ?How is the finance charge calculated??

How is the finance charge calculated?

The finance charge is the dollar amount you pay to use credit. The amount depends in part on your outstanding balance and the APR.

Credit card companies use one of several methods to calculate the outstanding balance. The method can make a big difference in the finance charge you'll pay. Your outstanding balance may be calculated

Over one billing cycle or two,

Using the adjusted balance, the average daily balance, or the previous balance, and

Including or excluding new purchases in the balance.

Depending on the balance you carry and the timing of your purchases and payments, you'll usually have a lower finance charge with one-cycle billing and either

The average daily balance method excluding new purchases,

The adjusted balance method or the previous balance method.

What is the minimum finance charge?

Some credit cards have a minimum finance charge. You'll be charged that minimum even if the calculated amount of your finance charge is less. For example, your finance charge may be calculated to be 35?--but if the company's minimum finance charge is $1.00, you'll pay $1.00. A minimum finance charge usually applies only when you must pay a finance charge--that is, when you carry over a balance from one billing cycle to the next.

What are the fees?

Most credit cards charge fees under certain circumstances:

Annual fee (sometimes billed monthly). Charged for having the card

Cash advance fee. Charged when you use the card for a cash advance; may be a flat fee (for example, $3.00) or a percentage of the cash advance (for example, 3%)

Balance-transfer fee. Charged when you transfer a balance from another credit card (Your credit card company may send you ?checks? to pay off the other card. The balance is transferred when you use one of these checks to pay the amount due on the other card.)

Late-payment fee. Charged if your payment is received after the due date

Over-the-credit-limit fee. Charged if you go over your credit limit

Credit-limit-increase fee. Charged if you ask for an increase in your credit limit

Set-up fee. Charged when a new credit card account is opened

Return-item fee. Charged if you pay your bill by check and the check is returned for non-sufficient funds (that is, your check bounces)

Other fees. Some credit card companies charge a fee if you pay by telephone (that is, if you arrange by phone for payment to be transferred from your bank to the company) or to cover the costs of reporting to credit bureaus, reviewing your account, or providing other customer services. Read the information in your credit card agreement to see if there are other fees and charges.

What are the cash advance features?

Some credit cards let you borrow cash in addition to making purchases on credit. Most credit card companies treat these cash advances and your purchases differently. If you plan to use your card for cash advances, look for information about

Access. Most credit cards let you use an ATM to get a cash advance. Or the credit card company may send you ?checks? that you can write to get the cash advance.

APR. The APR for cash advances may be higher than the APR for purchases.

Fees. The credit card company may charge a fee in addition to the interest you will pay on the amount advanced.

Limits. Some credit cards limit cash advances to a dollar amount (for example, $200 per cash advance or $500 per week) or a portion of your credit limit (for example, 75% of your available credit limit).

How payments are credited. Many credit card companies apply your payments to purchases first and then to cash advances. Read your credit card agreement to learn how your payments will be credited.

How much is the credit limit?

The credit limit is the maximum total amount--for purchases, cash advances, balance transfers, fees, and finance charges--you may charge on your credit card. If you go over this limit, you may have to pay an ?over-the-credit-limit fee.?

What kind of card is it?

Most credit card companies offer several kinds of cards:

Secured cards, which require a security deposit. The larger the security deposit, the higher the credit limit. Secured cards are usually offered to people who have limited credit records--people who are just starting out or who have had trouble with credit in the past.

Regular cards, which do not require a security deposit and have just a few features. Most regular cards have higher credit limits than secured cards but lower credit limits than premium cards.

Premium cards (gold, platinum, titanium), which offer higher credit limits and usually have extra features--for example, product warranties, travel insurance, or emergency services.

Does the card offer incentives and other features?

Many credit card companies offer incentives to use the card and other special features:

Rebates (money back) on the purchases you make

Frequent flier miles or phone-call minutes

Additional warranty coverage for the items you purchase

Car rental insurance

Travel accident insurance or travel-related discounts

Credit card registration, to help if your wallet or purse is lost or stolen and you need to report that all your credit cards are missing

Credit cards may also offer, for a price,

Insurance to cover the payments on your credit card balance if you become unemployed or disabled, or die. Premiums are usually due monthly, making it easy to cancel if the payments are higher than you want to pay or you decide you don't need the insurance any longer.

Insurance to cover the first $50 of charges if your card is lost or stolen. Under federal law, you are not responsible for charges over $50.

Before you sign up to pay for any of these features, think carefully about whether it will be useful for you. Don't pay for something you don't want or don't need.