Credit cards can be your best ally or worst enemy—it all comes down to understanding the rules. Here’s an easy guide to the must-know terms:
Key Terms to Know
- Annual Fee
Some cards charge a yearly fee for perks, while others don’t. Choose what fits your needs. - APR (Annual Percentage Rate)
A fancy term for “interest.” If you carry a balance, this is what you’ll pay.- Purchase APR: For what you buy.
- Balance Transfer APR: For moving debt between cards.
- Cash Advance APR: For withdrawing cash (often very high).
- Variable APR: Changes with market rates.
Pro Tip: Avoid interest by paying off your balance during the grace period.
- Balance
How much you owe on your card—your not-so-fun scorecard. - Balance Transfer
To save money, move debt from a high-interest card to one with a 0% intro APR. However, watch out for transfer fees (3–5%). - Credit Limit
The maximum amount you can spend. Using too much of it can hurt your credit score. - Credit Utilization Ratio
The percentage of your credit limit you’re using. Example: If your limit is AED 30,000 and you owe AED 7,500, your ratio is 25%. Keep it below 30% for a healthy credit score. - Grace Period
The interest-free time to pay your balance. Pay in full before the due date to avoid charges. - Fees to Watch Out For
- Late Payment Fee: A charge applied for not making the minimum payment on time, emphasizing the importance of timely payments to avoid extra costs.
- Foreign Transaction Fee: A percentage-based fee for purchases made in a foreign currency, which can increase the cost of international transactions.
- Cash Advance Fee: A fee for withdrawing cash using your credit card, often higher than regular purchase rates and accompanied by immediate interest accrual, making it advisable to use only as a last resort.
- Credit Score
The Credit Score is a three-digit number that estimates the probability of an individual or a company missing payments within the next 12 months. This score ranges from 300 to 900, with higher scores indicating lower risk levels. It is calculated using statistical models that analyze various data points from your credit profile.
Bottom Line: Credit cards aren’t complicated if you know the rules. We are here to help you master the game, but first, fill out our find your card survey so we can help you to play wisely.
