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Understand Credit Card Terms

Credit cards come with terms and conditions you may not expect or fully understand. Knowing what these terms mean will help you manage your credit cards well.

Annual fee. An annual fee may be charged simply for having the card, depending on your credit card company.

Balance-transfer fees. These fees may be charged when you transfer a balance from another credit card. You may be charged a balance transfer fee from the original card and the new card.

Cash advance fees. These fees are charged when you obtain cash from the ATM by using your credit card. This will usually cost you an additional finance charge of 3% to 5%. The fee may be a flat fee or a percentage of the cash advance.

Credit limit. Your credit limit, or credit line, is the total amount you can charge on your credit card, including purchases, cash advances, balance transfers, fees and finance charges. You may request an increase or decrease in the amount of available credit you have. Your credit card company may charge a fee for this request.

Grace period. Your grace period is the set amount of time, usually 15 to 30 days, during which you can make a payment without incurring finance charges.

Late-payment fees. Late-payment fees are charged if your payment is received after the due date or if you don't make a payment at all. Some companies have a set fee, such as $20 or $30, while others may charge you a percentage of your minimum payment. Making late payments will almost always cause the credit card company to increase your interest rate.

Over-the-limit fees. These fees may be charged if you exceed your credit limit. Some companies will charge you a one-time fee, while others charge the fee each time you make a purchase over your limit. The fee is usually $20, $30 or a percentage of the amount you've overcharged.

Other fees. You can be charged other fees depending on your credit card agreement. This may include fees for opening a new account, paying your bill by telephone or paying your bill with a check that is returned for non-sufficient funds.

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