Frequently Asked Questions
- What is credit?
- How is a credit card different from a debit card?
- Is there a list of some of the advantages of using credit?
- What is a credit history?
- What are the advantages and disadvantages of taking a cash advance on a credit card when one is low on funds?
- My credit record is not good, but there are lots of ads offering credit to people like me. Are there any kinds of credit I should avoid?
- How do I know when I have too much debt?
- What should I do to get out of my credit card debt?
- I'm making payments on several credit cards but the debts are not reducing. How can I get out of credit card debt as fast as possible?
- Where would I find a loan that would help consolidate all my credit card loans?
- What is credit counseling?
- How Can I Establish-or Rebuild-Good Credit?
- How does one calculate Credit Card Interest Rates?
- How Much Will I pay on interest?
- What Is the Periodic Rate?
I'm making payments on several credit cards but the debts are not reducing. How can I get out of credit card debt as fast as possible?
If you want to get out of debt, you should stop using your credit card and start paying down your most outstanding credit card debt. Pay as much as you can and come up with financial plan. The more you pay, the shorter your credit card life becomes. You end up paying less in interest.
Where would I find a loan that would help consolidate all my credit card loans?
You should seek for debt consolidation loans, at least reputable ones which have affordable interest rates.
What is credit counseling?
Credit counseling is a unique form of counseling. It focuses on the client’s financial picture and it involves a special relationship between a skilled helper and a client who is actively seeking positive change. Credit counselors working for credit card companies contact you to work out a plan to repay your bills. For more information, contact us and we will be more than happy to help you out.
How Can I Establish-or Rebuild-Good Credit?
If you want to establish a credit history, you should start small as you are in the beginning phase. Try applying for credit with a local bank, departmental store, or with a local business. You have to make sure that these credit grantors reports credit history information to the 3 major U.S. credit bureaus. If you want to re-build your credit, you should open a credit account with someone to cosign your credit card application. You can also obtain a secured card.
How does one calculate Credit Card Interest Rates?
The credit card interest rates depend upon what type of rate the credit card issuer is offering. There are basically 3 types of rate, variable-rate, fixed-rate, and tiered-rate. Variable rates are calculated based on margin, multiple and an index. An index is typically the prime rate; the one-, three- and six-month Treasury bill rates; the federal funds rate; and the Federal Reserve discount rate. A margin is a number of percentage points chosen by the credit card issuer. The issuer also selects a multiple
A fixed interest rate is self explanatory. The interest rate is fixed and is subject to change depending upon the credit card issuer.
A tiered interest rate is one where different rates apply to different levels of debt load. For example, 16% interest on debt of $0-$1000, 18% on debt of above $1500, etc.
Interest rates can go higher if you are not making your payments on time, or you have over your credit limit. Credit card issuers can also change their rates whenever they feel like and can charge for different rates for different types of transactions.
The most common indexes used by credit card issuers are the prime rate; the one-, three- and six-month Treasury bill rates; the federal funds rate; and the Federal Reserve discount rate. Most of the indexes are published in the money or business section of major newspapers. If the index rate used for your credit card changes, the rate on your card will, too.
The margin is a number of percentage points chosen by the credit card issuer. The card issuer also chooses the multiple.
The interest rate on a fixed-rate credit card plan, though not explicitly tied to changes in another interest rate, also can change over time. The card issuer must notify you before the "fixed" interest rate is changed.
A tiered interest rate means that different rates apply to different levels of the outstanding balance (for example, 16% on balances of $1 - $500; 17% on balances above $500).
Some card issuers may have a policy that raises your interest rate if you make late payments. For example, if you make 2 late payments within 6 months, the card issuer may raise your interest rate from 18% APR to 24% APR. If such a penalty rate applies to your card, the issuer must include a notice in the solicitation materials.
Card issuers may also charge different rates for different types of transactions. For example, the card may carry one rate for purchases of goods and services, another rate for cash advances, and still another rate for balance transfers.
How much will I pay on interest?
The interest you pay depends upon on your outstanding balance and the periodic rate provided in your credit card plan.
What is the Periodic Rate?
Periodic rate is the interest rate described in context to a specific amount of time. It can be charged on a daily basis, on a monthly basis, or on an annual basis. For example, if a credit card says 12% APR, the periodic rate is 1%.
