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Most every adult in America has a credit card, but very few take the time to look hard at their statement and understand what everything means. Rather they just pay their minimum payment and some of the ’smarter’ credit card holders pay more than the minimum. Take the time and learn all about all of the terms and information provided on your credit card statement. Here is a list of the big terms that you will need to know about on your statement:

Credit Limit: Sometimes this is referred to as your credit line. This is the maximum amount of money you can charge onto your account without being over the limit. If your credit card has a limit of $5000, you can spend $5000 before you are over your limit. Going over your limit should be avoided at all costs, and will cause a hefty fee. If you are near your limit and need to charge more, call your bank and often they will increase your credit limit and that way you won’t be over the limit.

Finance Charge / Interest: This is the charge for any money that you borrow. Whenever you carry a balance over from a previous month, you have to pay a finance charge on your account. It is usually based of the interest rate of your credit card and accrued on a monthly basis.

APR: This is your annual percentage rate. APR is the percentage of interest and fees you would pay if you kept a certain amount of dollars on the account for a period of one year. For credit cards this is generally the same as your interest rate which can range from 12-25% annually, depending who your credit card is with and how credit worthy they deem you to be.

Prime Rate: For credit cards, the prime rate generally means the rate that the Wall Street Journal published. This is usually the lowest rate a bank will lend to the very best customer. The rate changes based upon market conditions and the Wall Street Journal will update the rate accordingly. If you have a variable rate card and the prime rate increases your credit card interest rate will increase as well.

Grace Period: This is the time period that your banks will a lot you that you can make the payment and they will not charge any interest. Most credit cards have a grace period of 20-30 days after you made the purchase, often times you have to pay your bill in full to be given a grace period on new charges. If you carry a balance over from the previous month there is a good chance that you will start paying finance charges on the cards immediately.

Revolving Credit: This is the amount of money that you have charged and repaid on a month to month basis. This is the information that your credit card company reports to the three major credit reporting agencies, including Equifax, TransUnion and Experian, for purposes of your credit report and calculating your credit score.

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