5 Questions You Should Ask about Your Credit Card

Are you asking the right questions?

woman thinking about her credit card

Paying attention to your credit card terms can save you a lot of money. Answer these questions to find out if you could do better.

  1. What is the card's Annual Percentage Rate (APR)?

    This may seem like a no-brainer, but people often sign up for cards without knowing the rate they will be paying. This especially happens if you apply on the spur of moment, like just to get a temporary discount or free gift.

  2. Is the APR variable?

    The rate on a variable rate credit card changes with an index (usually the Federal Funds Rate). When the index goes up, so does the card rate. Some variable rate credit cards come with minimum APRs and won't go any lower.

    The interest rate on a non-variable card does not fluctuate with an index and will usually stay the same for longer periods of time. However, the rate could still change. According to federal law, issuers must give written notice of rate increases to cardholders before the new rate takes effect.

  3. Does the card have an annual fee?

    A simple, no-frills card should not charge you an annual fee. Often, rewards cards or prestige cards charge annual fees in exchange for rewards or special services. Often the annual fee means the rewards aren't worth it.

  4. What are the penalty policies?

    No one plans on missing a credit card payment or going over their limit, but it's still important to know what will happen if you do. Besides late fees, you should also pay careful attention to what will happen to your APR. Many cards will begin charging a much higher APR after just one late payment.

  5. How long is the card's grace period?

    A grace period is the time between a purchase and when interest begins to accrue. If a payment is made in full by the end of the grace period, no interest is charged. Most cards offer grace periods to customers that don't carry a balance on their card.