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Credit cards are an interesting financial mechanism that can work in different ways based on the way they are used by card holders. That is why you need to understand everything about a credit card, before you actually start using it for your transactions. Credit cards allow you to take an interest-free debt for a stipulated period of time. In other words, you can pay with your credit card and before the due date repay the credit card company the actual amount spent. However if you miss that due date, the credit card issuer can charge you interest on the debt, which is usually higher compared to bank loans as well as a late fee. Here are features you need to explore before taking a credit card.

APR or annual percentage rate

A credit card with high interest rate is always laden with risk irrespective of what other benefits it offers. If the APR of a credit card is 12% for example, it means that you will be charged $1 for every $100 of debt, per month, if you don’t pay your dues before the deadline. Higher the APR or higher the debt, more will be the interest that you would be paying. A credit card with low interest is ideally a good option as long as it doesn’t tempt you into taking too much debt.

Fixed and variable APR

Not all credit cards charge fixed interest rates. Sometimes the rate varies and the best example is provided by balance transfer cards. In their case, the interest rate is increased significantly after the introductory period. Sometimes, you need to pay attention to the terms and conditions of the credit card as well. If a card holder doesn’t pay the bills on time, it is quite possible that the credit card company will increase the interest rate as a penalty. As per the new credit card rules, you could bring the interest rate back to its original if you consistently pay bills on time for the next 6 months. There is also a provision that credit card companies can increase the interest rate by giving you 45 days advance notice. During this period, you have the right to reject the proposal and move on to another credit card by repaying the debt at old interest rates.

Credit card fees

Before using a credit card, you must be aware of what fees is charged by the card in various scenarios like cash advance, late payment, exceeding credit limit, currency conversion and payment with check carrying insufficient funds.