Beginners Guide To Credit Cards

This is the money that you have to pay back if you miss your repayment deadline or use the card to get cash out directly from the card account. It’s just like how a regular loan would incur interest. Different credit cards will have different interest rates, which are calculated as a percentage per annum.

Per annum is Latin and basically translates to “each year”. So percentage per annum is the percentage of money that you need to pay back calculated over the year. This can vary, depending on whether your bank calculates simple interest or compound interest, so it’s worth asking your bank how they calculate interest for the card option you might be considering.

Simple interest is the most basic way of calculating interest. Essentially, it’s determined by the principal amount (in other words, the initial amount) you borrow or spend on the account, where interest is calculated on that principal amount only. Say you borrow $100 at 5% per annum, at the end of the year you will owe $105 (that’s 5% of $100 if maths ain’t your forte).

Compound interest is a bit more complex – it’s where the interest is calculated on the principal amount borrowed, plus the interest that gathers in the mean time. It’s kind of like interest on interest. The amount of compound interest you accumulate will depend on how frequently it is compounded, or in other words, how many compounding periods there are. For example, compounded “monthly” means you will earn compound interest 12 times in a year as there are 12 compounding periods.

is the amount of time you have to pay the money you have spent on purchases on your credit card back before you have to start paying interest. This period is commonly between 30 and 55 days, but it depends on which credit card you choose.

This is the minimum amount you must pay back each month on your credit card account to stay in your bank’s good books and prevent you from getting charged late fees or other charges. With some cards it’s a flat fee (usually around $25), with others it’s calculated as a percentage of your monthly closing balance (such as 2 or 3 %). You can obviously pay more or all of your account if you wish to, you’ll simply incur interest on whatever amount of your bill you don’t pay off within that cycle.

This is the fee you pay each year to have that specific credit card product. Some cards do not charge an annual fee, while others have an initial cost and lower annual fees.

This is an extra flat fee charged for failing to make your minimum repayment each month.

This is the fee you pay to take cash out at the ATM via your credit card (like you would with a regular bank card).

This is a fee that you pay when you make a transaction overseas, either while travelling, or locally, with a merchant that is located overseas.

This information is intended to be general in nature only and might not apply to your personal circumstances. When in doubt always seek professional guidance.