How do credit cards work?

Question

Do you not get charged finance charges if you pay the minimum monthly payment or do you have to pay it off fully every month?

Answer 1

Credit card provide a 20-25 day grace period to pay your bill without incurring a finance charge. For example, you buy a new TV on 5/15 for $500. On 6/1 your statement is prepared and your minimum payment is calculated at something like $10 or $20. This is the minimum amount you have to pay in order for them to consider that you are on a payment plan. If you don't pay at least that much you will incur additional fees.

Your payment due date will be something like 6/25. If you pay the entire balance ($500) you don't owe any finance charges. You just send a check or do an electronic transfer from your checking account to the credit card bank online, before the due date. You have to be careful of due dates, though, since there is lots of fine print about the time of day your payment is due. If it's one minute later you will have to pay a fee (usually $39).

If you only pay part of your bill, say $250, then next month you will owe $250 plus a finance charge (1/12 of your annual percentage rate... something like 7.9% to 24.9%).

Answer 2

If you pay off your credit card balance each month before the finance charge is due you will not be charged. But you must pay off the full balance and any pending charges that will come in that month. It is very important to shop around and find a card that will give you a 0 finance charge or at least the smallest amount. After all you are using their money for a length of time. But if you find one that says 0% finance charge read the fine print it is usually for a specific length of time.

Answer 3

Interest is charged on any outstanding balance. The minimum payment asked for each month is usually 5% of the balance owing, but if you continually pay only the minimum amount, it will take you years to pay off the total amount and the amount of interest will be huge. Paying off the entire balance each month is what most people would love to be able to do but in many cases it is not possible. Keeping your credit card account in good order is one way of improving your credit score.

Answer 4

If you pay off the total bill every month (and the card has no yearly fee) you pay no finance charges or interest. If you pay the minimum (which is what the finance company hopes you do) You will be paying about 30 cents for every dollar you spend. So buy something for 1 dollar and you just spent $1.30

Answer 5

different cards have different fees associated with them

yet you will pay fees when you use the card
and be charged interest on any outstanding balance

making minimum payments only increases
the interest charges over the long run of you
not getting it paid off FAST.

its better to avoid using the credit card if possible
and maybe use it for small purchases to help
build your credit so that you can show a history
of making payments on time and paying them off
in full.

Don't depend on credit cards - keep them paid off.

read up on the fees on any card you use
interest rate
yearly fees
late fees
transfer fees
cash advance fee -- avoid using it to get cash - interest rate on cash advance is huge

do your home work so you know what to expect
and not get trapped paying off a purchase forever.

Answer 6

well my credit card if i pay the full amount off the first month it comes in there is no charge. while others credit card company may charge you from day one so read the fine print when you apply for one or if you have one read the bill statement on the back or call the 1-800 number on the card for the questions you have with charges that may apply to the card

Answer 7

Dont' use them is my answer, but if you do make that UNWISE decision, yes, pay it off completely and keep the money ready to be sent to them when the bill comes or you will be sorrrrry. If you charge 100 at the store then keep the bill in a credit card jar you have made and know that that 100 dollars is coming out of your NEXT paycheck. Just don't use them. Trust me.

Answer 8

There's a lot of credit card companies out their vying for you business. They give out offers in the hope of outdoing the offer of another company and thus, luring more account holders to them. Some companies might even go as far as offering 0% APR or waive your annual fees. They also try to give out the most interesting credit card perks.

In choosing which company you're going to apply a credit card for, you have to consider everything there is about credit cards. Compare interest rates and benefits. Some cards may have lower interest rates but charge a lot of extra fees. You would also have to beware of 0% APR credit cards since most of them come with a lot of catches.

Then of course, when you have your credit card already, just make sure that you only make wise purchases. Only use your credit card if you're sure that you can afford to pay for it. It would be very difficult to get out if you get caught up in a vicious debt cycle. The use of credit cards requires great financial responsibility. You can use credit cards to your advantage, or they can lead you to your financial distress. Read more about it at: http://www.credit-card-gallery.com/article/148,Everything_About_Credit_Cards

Answer 9

Unless there is a promotional offer that states there will not be interest charged for a certain period of time, then you will be charged interest if you do not pay off the full amount.

Answer 10

if you pay the minimum monthly payment, you can go on using the credit card without blockage. but if you don't pay all the debt, the interest rate will be applied and will be applied till you pay up your debt