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Credit Card FAQ's
Here you will find answers
to commonly asked questions about credit cards and credit in
general.
Note: These answers are for
general information only. Please consult a financial expert with
specific and complex questions. These answers should be used
as part of a full research process.
:: Question List
· What is an introductory (or intro) APR?
· What is a balance transfer and/or balance transfer rate?
· What is a balance transfer fee?
· What is a fixed APR credit card?
· What is an instant approval or instant decision credit
card?
· What is a "rewards" credit card?
· What is a "cash back" credit card?
· I am a student - Which credit cards can I apply for?
· I have bad credit - Which credit cards can I apply for?
· What is a "secured" credit card?
· What is an "unsecured" credit card?
· What is a prepaid card?
What is an introductory (or
intro) APR?
An introductory annual percentage
rate (APR) is a temporary APR that typically changes to a higher
rate after the intro period (typically 3-12 months). Many people
make use of these promotions to make a large purchase (or purchases),
which they can then pay off in a series of months.
Some credit cards have an intro
APR attached to only purchases, some have an intro APR attached
to only balance transfers and some have an intro APR attached
to both balance transfers and purchases.
Every credit card is a bit
different and promotional offers often change, so be sure to
thoroughly look over the terms and conditions for each specific
card before applying.
· Compare low APR credit
cards
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What is a balance transfer
and/or balance transfer rate?
In the most basic terms, a
balance transfer is a way of moving a debt from one credit card
to another credit card. This is often done to save money, as
the new credit card may have a lower finance rate (APR) than
the old credit card. Occasionally, credit cards have promotional
balance transfer rates that typically last from 3-12 months.
Every credit card is a bit
different and promotional offers often change, so be sure to
thoroughly look over the terms and conditions for each specific
card before applying.
· Compare balance transfer
credit cards
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What is a balance transfer
fee?
A fee charged by a credit card
company to transfer a balance from another account to that particular
credit card. It is generally 1% to 5% of the transferred balance
(sometimes up to a certain dollar value). For example, a balance
transfer fee could be 3% of the transferred balance up to a maximum
of $50. Not all credit cards charge this fee.
· Compare balance transfer
credit cards
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What is a fixed APR credit
card?
Fixed APR credit cards carry
a fixed (stable) interest rate that typically lasts for as long
as you use the card. For example, if you transfer a balance to
a credit card with a fixed APR of 9.9%, the APR for this balance
will typically stay at this 9.9% level until the balance is paid
in full.
Some credit cards offer a fixed
APR on only purchases, some offer a fixed APR on only balance
transfers and some offer a fixed APR on both purchases and balance
transfers. Many people choose a fixed APR card to ease the burden
of constantly switching balances from one card to another once
low intro APRs disappear and higher APRs take over.
Every credit card is a bit
different and promotional offers often change, so be sure to
thoroughly look over the terms and conditions for each specific
card before applying.
· Compare fixed APR
credit cards
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What is an instant approval
or instant decision credit card?
Certain credit cards offer
instant response (or instant decision), otherwise known as instant
approval, to people applying for the card. With these credit
card offers, you should be able to find out if you have been
approved for that particular credit card or not in a matter of
minutes.
However, certain circumstances
do occasionally arise in which the credit card issuer will need
more time to determine if you are approved for the specific credit
card or not.
It is not guaranteed that you
will receive an instant decision with these credit cards. However,
these credit cards do offer this feature in most cases.
· Compare instant approval
credit cards
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What is a "rewards"
credit card?
Rewards credit cards give various
rewards to cardholders for making purchases with the card. A
cardholder accumulates rewards based on the dollar amount of
his/her purchases with that particular credit card over a period
of time.
Currently, you can find rewards
credit cards that give:
- Free airline tickets
- Other travel rebates
- Automotive rebates
- Gasoline rebates
- Entertainment rewards
- And more ...
Because some rewards programs
can be costly for credit card companies, some rewards credit
cards come with an annual fee. Every credit card is a bit different
and promotional offers often change, so be sure to thoroughly
look over the terms and conditions for each specific card before
applying.
· Compare credit cards
that give rewards
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What is a "cash back"
credit card?
Cash Back credit cards give
cash rewards to cardholders for making purchases with the card.
A cardholder accumulates cash rewards based on the dollar amount
of his/her purchases with that particular credit card over a
period of time
A typical cash back rate hovers
around 1%. However, some cards offer a higher cash back percentage
with increased usage and some offer a higher cash back percentage
at select merchants. Many cash back cards offer cash back on
purchases but do not offer cash rewards on balance transfers
or cash advances.
Each cash back credit card
is a bit different, so be sure to read the terms and conditions
to find out what cash back percentage you can expect, whether
there is a limit on how much can be accumulated in a year, etc.
Be sure to thoroughly look over the terms and conditions for
each specific card.
· Compare credit cards
that give cash back
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I am a student - Which credit
cards can I apply for?
Students generally have little
or no credit history. Because of this, students may often find
it difficult to get approved for a credit card. Luckily, student
credit cards do exist. This type of credit card is set up to
help students build up the credit history that most don't already
have.
Student credit cards are often
scaled-back in terms of rewards, features and other benefits,
but can still be a valuable commodity. If used wisely, a student
can take the first step towards building a solid credit history.
Every credit card is a bit
different and promotional offers often change, so be sure to
thoroughly look over the terms and conditions for each specific
card before applying.
· Compare credit cards
for students
^ Back to the Question List
I have bad credit - Which credit
cards can I apply for?
Credit can go from good to
bad to poor for a number of reasons, including missed payments,
late payments, etc. On the other hand, bad credit can improve
to good credit, too. But this takes a little bit of work.
Depending on your situation,
debt consolidation and/or credit repair may be the route to take.
Also, certain credit cards are made to help "rebuild"
credit histories. Secured credit cards are for people with no
credit or poor credit who are trying to build or rebuild credit
history. But some unsecured credit cards can also serve similar
purposes.
Often with cards that help
to rebuild credit, low credit lines are given ($250 or so) and
additional fees may apply (application fees, etc.). Be sure to
read over any terms and conditions for any of these services
before applying. Be certain of any fees that you may incur before
proceeding. But if you use the card responsibly and pay all of
your bills on time, you can ask for a credit increase down the
road. The extra fees and low credit lines will be worth it if
it helps get your overall credit back on track.
· Compare credit cards
for those with bad credit
^ Back to the Question List
What is a "secured"
credit card?
Secured credit cards require
collateral for approval. With secured credit cards, a security
deposit is needed to secure the credit card. The amount of the
security deposit usually equals the credit limit for that particular
credit card. Generally, secured credit cards are for people with
no credit or poor credit who are trying to build or rebuild credit
history.
· Compare credit cards
for those with bad credit
^ Back to the Question List
What is an "unsecured"
credit card?
Unsecured credit cards are
not secured by collateral. Customers qualify based on credit
history, financial strength and earnings potential.
· Compare credit cards
for those with bad credit
^ Back to the Question List
What is a prepaid card?
Prepaid cards are, in fact,
not credit cards. Prepaid cards act like credit cards but, in
reality, are more like debit cards. These types of cards have
many benefits, including: No finance charges, easy budgeting,
avoiding debt, etc.
With prepaid cards, the cardholder
determines the credit line. Generally speaking, a cardholder's
credit line depends on how much money he/she transfers to the
card. Therefore, there is little risk of running up credit card
debt, while budgeting is made easier.
Although most prepaid cards
do not charge finance fees, other fees may apply, including:
monthly fees, startup or application fees, overlimit fees, ATM
fees and more. Be sure to thoroughly look over the terms and
conditions for each specific card before applying.
· Compare prepaid cards
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