Looking for a good credit card deal? Below are some credit pricing issues and trends:
Grace periods allow credit card holders to avoid a finance charge by paying the current balance in full before the due date on their statement. In other words, during the grace period, a transaction does not accrue any interest. An exception is the use of credit cards for cash advances. There is generally no grace period on cash advances so interest is charged from the date of the advance. According to a 2000 survey of 100 credit card offers by the state Public Interest Research Groups, or PIRGs, 99% of credit cards had grace periods of 25 days or less and the average grace period was 23 days. With most credit cards, cardholders get a grace period only if they pay their entire balance in full during the previous month.
"Teaser" rates are just that: low-interest rates used to entice people to apply for a credit card. Unfortunately, they don't last very long. According to the 2000 state PIRG's study of 100 credit card offers, over half (57%) had low, short-term rates. The average introductory annual percentage rate (APR) was 4.13%, which lasted an average of 6.8 months. The range of introductory period lengths was 3 to 12 months. After the introductory time period, the average introductory rate jumped 264% to an average regular rate of 15.04%. Always find out the post-introductory period APR before applying for a "teaser" rate credit card.
In life, they say timing is everything. A recent trend is less time available to pay credit card bills due to a shorter time between the arrival of a bill and the payment due date. In some cases, the time allotted is less than two weeks, including the time required to mail a statement to cardholders and the time it takes to return a payment by mail. If someone is away on a two-week vacation or business trip, they might not have enough time to make their payment by the due date. This problem is compounded by earlier posting deadlines such as 8 a.m. or 10 a.m. on the due date. Since it is unrealistic to expect mail to be delivered this early, the cardholder's due date effectively becomes the day before. Thus, it is more important than ever to plan ahead to pay bills on time to avoid late charges and penalty interest rates.
Another practice that has been increasingly adopted by credit card issuers in recent years is interest backdating. Many card issuers charge interest from the date a charge is posted to your account. This could be a day or two up to about a week after the date of the actual transaction. Some creditors are charging interest from the date of the purchase, days before they have paid a merchant on your behalf. In other words, they are charging consumers interest from the date that a transaction was made, a practice known as "backdating" (going back in time). The result is additional interest income for credit card issuers and a higher cost for consumers because the average daily balance on which interest is charged is increased. Read "the fine print" or ask your credit issuer if they use this practice.
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