What you should know about your credit cards

If you have one credit card or 20, it important that you be aware of how much using it really costs you. To know this, there are several factors you should take into account. These are good points to consider if you are considering obtaining new credit cards too.

Know any card’s annual percentage rate (APR). The APR is the interest rate of your card. Every credit card offer must include the APR and whether the rate is fixed or if it will rise. Many credit cards have variable interest based on prime. The lender also has to tell you the periodic rate of your APR.

Know how your interest is calculated. You’ll read something in your credit cad statement about a balance computation method. This method is a formula used to determine amount of the outstanding balance on which you're charged interest during each billing period.

The finance charge on your billing statement is the cost of credit for the month. It’s calculated by multiplying the outstanding balance by the periodic rate.

Know your credit card limit. This is the amount of purchases and cash advances you can charge to your card. It is a good idea to not max out your credit card, but if you know you are close, be sure to know your limit.

Be sure to know if your card charges fees and how much they are. Most credit cards charge fees for balance transfers, cash advances, late payments and going over your credit card limit. Some cards charge an annual fee.

Most credit cards have a grace period, which is the time during the billing cycle in which you can pay off the balance to keep from paying finance charges.

Your lender will give you a statement of terms that will have all of this information in it when you are issued a credit card. If you can’t find this information in the materials or don’t understand them, call your lender for clarification.