Credit Cards One of the most common marketing strategies used in today's economy is the mailer for a "pre-approved" credit card. Although these offers can be attractive, there is usually a catch, and it is often written in small print that's difficult to understand. Many consumers don't realize what the costs are, and how quickly they can accumulate. Before accepting one of these credit cards, you should understand some of the terms they use in their advertising. The most important of these terms is the Annual Percentage Rate (APR), which is disclosed when you apply for the card, when the account is opened, and with every monthly statement. The APR is used to determine the cost of your debt based on a percentage of what you owe. It is broken down into a monthly periodic rate one-twelfth of the APR - which also appears on your monthly statement. The monthly finance charge is then calculated by multiplying the monthly rate by the total debt. Be aware that the APR my vary according to your payment history. Other important terms include the following: Grace Period. This is the period of time after a purchase, and before finance charges start to accrue. Typically, it ends on the due date of the monthly statement, giving the credit card holder a period of time to avoid finance charges by paying the balance in full. However, if you carry a balance from month to month, there is no grace period. Annual Fees. Many credit card issuers charge annual membership fees, which can run as high as $75 for gold or platinum cards. By shopping around for the best deal, you can usually find a card with no annual fee. Credit unions tend to have no annual fees, as well as low interest rates, on their credit cards, so if you're a member, be sure to check. Transaction Charges. Some credit cards charge a fee and a much higher APR when you use their card for a cash advance. Other fees can be assessed if you are late on a monthly payment or charge more than the credit limit. Choosing a credit card strategically can save you a lot of money. First, ask yourself if you will be carrying a balance or paying the full amount every month. If you are sure that you will pay the balance every month, then the APR doesn't matter and you should choose a card with no annual fees. However, if you do plan to carry a balance, a smaller APR is much more advantageous and may be worth a low annual fee. A credit card can be a valuable tool when used for emergencies or in situations where cash is just too inconvenient to carry. Just make sure you don't fall into the "credit card trap" by letting the purchases get out of hand.