Know How Your Credit Card Charges You
There are many ways to choose a credit card. You could:
- Just go out and get the first one that comes your way
- Ask around and get the most popular card – so many people couldn’t go wrong
- Or, you could make an informed decision by asking around and reading up on the various charges you would need to pay for maintaining a card. Simple logic suggests that the card, which allows you to pay the least in terms of charges, is the best.
So in case you prefer to use the third method of choosing a credit card, you’d probably want to know more about finance charges – charges that you would have to pay to carry a balance between billing cycles. The exact amount would be based on your interest rate and various other factors, like for instance the uses you put your card to. Now your interest rate is also not flat across the board and varies depending on whether you make a purchase, a balance transfer, take a cash advance… etc.
Confused already? You know what, I believe that these credit card companies make the whole calculation so complex with the single-minded objective of confusing us and squeezing out as much money from us as possible. So, what are we as consumers supposed to do? Outwit them at their own game of course. Agreed there are fees within fees, different methods of calculating interests and even the grace period. However, once you know the basic methods of calculating interest charges, you’ll be able to ensure that your monthly statement is accurate.
There are quite a few methods of calculating interest and just so I don’t end up confusing you, I’m going to deal with them one by one. This time, we’ll examine the Adjusted Balance Method. In this method, once any credits or payments are taking into consideration, all finance charges are assessed. So in case you have a $750 balance on your card and you paid $100 on it before the end of the billing cycle, your interest charges would then only be applied to the remaining balance of $650. The adjusted balance method is the most favorable one for a consumer and works to his advantage. We’ll discuss the other methods next time.