Credit Card Basics

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Before applying for a credit card, it’s important to ensure you have a basic understanding of how credit works and some of the key terms you will come across as a cardholder. Part of being financially responsible is making sure you are knowledgeable and know what to expect before taking any major financial step. Read the list below to familiarize yourself with some of the most important credit card terminology and meanings:

Credit Score

Your credit score is a 3-digit number (usually between 350-800) that represents your creditworthiness according to credit lenders. Your credit score is calculated by the three main credit bureaus (Equifax, Experian, and TransUnion) and used to determine the level of risk when credit card companies or financial institutions issue you a credit card or a loan. Based on your credit history, lenders use your credit score as an indication of your likeliness to repay your debts on time.

Credit Limit

Your credit limit on a credit card is the maximum amount you can charge to your card. Do not exceed your credit limit! The credit limit you are initially approved for is not necessarily what you are stuck with the entire time you have the card. If you are just starting out with credit and don’t have a very long history, your credit limit will likely start out lower until you establish more history. But as long as you use credit wisely and make your payments on time, you will likely see your credit limit increase after time. Getting too close to or exceeding your limit could jeopardize your chances of receiving a higher credit limit, and will hurt your credit score.

Balance

This is the total amount of funds you owe to your credit card issuer. Your balance fluctuates every time you make a purchase using your credit card and every time you make a payment. Any amount that remains at the end of your monthly billing cycle gets carried over to the next month’s bill.

Revolving Balance

This is the amount of your used credit that you have not yet repaid and will continue to accrue interest until it is paid off completely. You will not have a revolving balance if you pay your credit card balance in full each month.

Grace Period

This is the time period during which you will not be charged interest on your balance. If you apply for a credit card during a special promotional offer with no interest for a limited time, you’ll want to pay your balance off in full before the grace period ends so you are able to make the most of this offer.

Annual Percentage Rate (APR)

The APR is the annual cost of borrowing money with your credit card, or what you would pay on a yearly basis for interest on your credit card purchases if you don’t pay off your credit card balance in full each month. Some credit card lenders have a different APR for purchases, balance transfers, cash advances, and any penalties. Your APR on credit card purchases is the interest rate you are charged after the grace period ends.

Due Date

This is the date by which your minimum payment is due to your credit lender. You must make your payment by the due date, otherwise you will be penalized with late fees and your interest rate may increase. Make sure you submit your payments on time each month, as late payments will negatively impact your credit score.

Minimum Payment

Your minimum payment is the lowest amount you can pay each month to still remain in good standing with your credit lender. Keep in mind, paying only the minimum payments instead of your full balance means you will end up paying even more in interest charges. You will also see a decrease in your credit score. If you only pay the minimum payment each month, it will feel like it’s taking forever to pay off your balance. If you can’t pay the balance in full, you should commit to paying as much as you can afford so you can pay down your balance as quickly as possible.

Late Payment Fee

If you fail to pay at least the minimum payment on your credit card bill by its due date, you will incur a late payment fee on top of the minimum payment amount. The fee amount can vary depending on the amount of your credit card balance, but this penalty can be avoided altogether as long as you stay on top of your payments. Late and missed payments damage your credit score and result in negative remarks on your credit report. Set up automatic transfers for at least your minimum payment amount, so you can rest assured your payments are always submitted on time.

Annual Fee

The annual fee is a yearly charge for using a credit card and taking advantage of its benefits. There are some credit cards that do not charge an annual fee, like Robins Financial credit cards. Getting a credit card with no annual fee helps you save even more!

Balance Transfer

A credit card balance transfer is when you apply for a new credit card with a lower interest rate than your current card, and then transfer your balances from your existing card (or cards) to the new one. Essentially, you’re using a new card to pay off the old one. Balance transfers can be a useful tool to help you pay off your existing credit card debt faster and at a more manageable rate.

Security Code (CVV)

The security or CVV (Card Verification Value) code on the back of your credit card is used mainly for online transactions or over-the-phone purchases. This security code helps merchants verify your identity for these transactions when your card is not physically present. It also helps protect you against card skimming devices, most often found at gas stations pumps, convenience stores, and ATMs. These devices steal your card’s data from the magnetic strip. But since the CVV is not included on the card’s magnetic strip, skimmers cannot detect it.

EMV Chip

EMV or chip cards are the result of a joint effort between Europay, Mastercard® and Visa® to create a global security standard to ensure your card’s protection everywhere you use it. In addition to the magnetic strip on the back of the card, these cards also have an embedded microchip on the front. The microchip generates a unique code for each new transaction, adding an extra layer of security to protect you against card fraud.

Rewards Program

Some credit card lenders offer additional perks for their cardholders, so it’s best to shop around for the card with the best rewards program to fit your lifestyle. Our Robins Financial Credit Union Visa® Platinum Rewards Credit Card is designed to offer you premium purchasing power at no additional cost. Through the ScoreCard® Rewards Program, you’ll earn points on your purchases which can then be redeemed for a wide variety of items. Redeemable options include cash back, gift cards, unique experiences and travel opportunities, name-brand merchandise, fuel discounts, and so much more!

The Robins Financial Credit Union Visa® Platinum Rewards Credit Card is one of the best cards you can carry. We offer great rates, no annual fee or balance transfer fee, plus we have convenient payment options to help make your life easier and make sure you never miss a payment.

Start earning your rewards today! If you don’t already have a Robins Financial Credit Union Visa® Platinum Rewards Credit Card and are ready to apply, you can view rate information and our credit card agreement online now. Apply online, stop by one of our branches, or give us a call.

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