Credit cards come with a host of features and benefits – a good reason why credit cards are a popular phenomenon. If you are looking to apply for a credit card anytime soon, here are 10 things you definitely need to know. These points will give you a better understanding of how credit cards work and what you can expect from them.
Annual fees on credit cards
All credit cards offered by banks (at least a major percentage of them), come with an annual fee. The annual fee mostly varies from one card to another, even in the case of cards offered by the same bank. Usually, Premier cards that offer better benefits than normal cards come with a higher annual fee.
While the Primary card almost certainly comes with an annual fee, supplementary cards also come with an annual fee in most cases. Sometimes, the annual fee on the supplementary card is waived for the first year or so – this is to keep the card more competitive and in-demand. Certain banks waive the annual fee on the primary card as well – for the first year, or first two years, or longer.
Annual rate of interest
All transactions you make using your credit card attract a certain rate of interest known as the annual percentage rate of interest (APR). The interest rate is dependent on the bank that’s offering the card and the type of card. The interest rate for most credit cards is Singapore is between 23% p.a. and 30% p.a.
Banks allow for an interest free period of about 21 days from the release of the statement (again, this depends on the bank and the type of card) and don’t charge an interest if the amount is repaid in full within this interest free window. If the amount isn’t paid before the end of the interest free period, interest charges will accordingly hold applicable.
Cash advance charges
Credit cards enable customers to make emergency cash withdrawals from ATMs. These cash advances carry a handling charge of about 5%-6% of the withdrawn amount, besides interest charges that fall in the range between 23% and 28% p.a. Interest on cash advances is computed on a daily basis at a compounding rate until the amount is repaid in full. Cash advances are usually a risky phenomenon, mostly considering the high interest charges. So if you withdraw money using your credit card, it is advisable that you repay the amount in full at the earliest.
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