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You and Your Credit Card Managing Your Purchasing Power

Credit Cards are becoming more common as a means of payment for many individuals and businesses. Most financial institutions offer credit card facilities to their customers.

What is a credit card?
A credit card is a means of making payment by using a line of credit with the financial institution that has issued the card.

What are some of the characteristics of a credit card?
Credit Limit:
Your credit limit is the maximum cash value assigned to the card by the bank. This credit limit can be for cash advances or to make purchases.

The balance on your credit card is the amount of credit that you have used. It is the total of your cash advances, purchases and may include credit card fees. The higher your credit card balance, the less credit you have available to make other transactions.

Annual Percentage Rate (APR):
The annual percentage rate (APR) is the interest rate applied to a balance carried beyond the grace period. Cash advances incur additional charges (cash advance fee) beyond the APR on outstanding balances.

Grace Period:
The grace period is the amount of time granted to pay your balance in full after which charges are applied.
If you carried a balance from a previous month, you may not have a grace period for new purchases.
Cash advances generally do not have a grace period. To find out the length of the grace period, you should refer to the credit card application or your credit card agreement.

Finance Charge:
The finance charge is the cost of carrying a balance. Finance charges are computed using your balance, the APR and the time the balance is deemed to be outstanding. Some credit cards carry a minimum finance charge. If your calculated finance charge is less than the minimum, you must still pay the minimum charge.

Incentives and Rewards:
Some financial institutions offer rewards and other incentives for using their credit card. Rewards come in various forms such as cash back; ‘points’ to redeem; travel miles; discounts, etc.

Credit Card Fees:
Some of the most common fees are: annual fees; finance charges; late fees and over-the-limit fees.

Features of the Credit Card
• Every credit card has its unique, confidential and card - holder specific Personal Identification Number (PIN).
• Most credit cards carry the card holder’s name emblazoned on its front and usually, the card holder’s signature at the back.
• Each card has its own number. This comprises:
The prefix – which determines the credit card network;
The BIN – which is the Bank ID; The Account Number and The Validity Check Code.
• In addition to the main credit card number, credit cards also carry expiration dates (given to the nearest month), as well as extra codes such as issue numbers and security codes. Not all credit cards have the same set of extra codes nor do they carry the same number of digits.

What should I consider when choosing a credit card?

In choosing a credit card, you ought to consider
• Your personal spending habits.
• The purposes for which the card is to be used.
• The pre-approved credit limit that you will be granted.
• The length of the grace period, if any.
• The interest rate applied to unpaid balances and all associated charges.
• All the terms and conditions of using the card.
• The extent of local, regional or international acceptability of the card for which you are applying.
• The incentives and rewards that are related to the card usage.

What are some advantages of using credit cards?
• Credit cards are convenient and eliminate the need to carry large sums of cash.
• Credit cards provide additional purchasing power. However there is a cost if the sum used is not repaid in full, on or before the due date stipulated.
• Various incentives such as bonus points, discounts, cash back rewards and travel miles are offered with usage of these cards.

What are some disadvantages of using credit card?
• High interest charges can apply if the account is not paid off in full on or before the due date. These interest charges can be as high as 24% per annum. Moreover, if the minimum payment is made, an additional late payment fee may apply.
• Any cash withdrawn from your credit card can incur an upfront charge. This can amount to 2.3% of the sum withdrawn. In addition, interest accrues daily from the date of withdrawal until the amount is repaid in full.

What is Credit Card Debt?
• Credit card debt arises when the outstanding balance is not paid off on or before the due date.
• Credit card issuers offer customers the facility of making minimum payments in order to keep their card/account active. This option is often the cause of many customers getting into insurmountable card debt. When balances are not settled in full by the due date, interest charges accrue. This increases the amount to be repaid and where this is repeated, large outstanding credit card debt can result.

How to Manage the use of your Credit Card and Avoid Credit Card Debt?
To manage the use of your credit card and avoid falling into credit card debt, the following pointers can serve as your guide:
• Do not apply for, or accept a credit card if you cannot manage the repayments.
• Do not accept or request an increase in your credit limit unless you know you can manage the increase.
• Pay the full outstanding balance on or before the due date. Avoid making only the minimum payments on your credit card.
• Avoid having too many credit cards.
• Shop around for the credit card that best suits your individual needs, ensuring that you compare interest rates, administration fees, acceptability by the merchants you patronize and the interest-free periods for repayment.
• Avoid withdrawing cash through your credit card. 

What is Credit Card Fraud?
Credit card fraud refers to the unauthorised use of a credit card to make purchases or obtain funds from someone else’s account.
How can you protect yourself from becoming a victim of credit card fraud?

• Never disclose your Personal Identification Number (PIN) to anyone.
• Refrain from writing down and/or leaving your PIN in a conspicuous place.
• Keep your card with you at all times and in a safe place.
• When making credit card transactions, always have your credit card in view. You have the right to observe any transaction involving your credit card.
• When you sign a receipt, draw a line through any blank spaces above the total.
• Keep a record of your card account number, expiry date and card issuer contact information in case of loss or theft.
• Report lost or stolen credit cards immediately to minimize the occurrence of unauthorized transactions.
• Reconcile statements promptly.
• Exercise caution if requested to disclose personal information to callers who say they are from your credit card company.

Watch out!
• Credit Card interest rates can be as high as 24 percent per annum. Use your credit card only when necessary and pay off the balance on or before the due date.
• Some card issuers charge a higher interest rate for late payments. Carefully review all penalties which can be incurred in the event of late payments.
• Carefully compare interest charges when shopping for a credit card. A comparatively low interest rate may be just an initial rate that would increase after a period of time.
• Annual fees can range from TT$150.00 to TT$300.00. You will be required to pay the annual fee whether you use the card or not.

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