Financial education has always been highlighted as one of the keys to success – and when you’ve just declared bankruptcy, it’s more important than ever to stay on top of important (and often confusing) financial terms. After all, many brilliant consumers often crumble in the face of confusing or unclear financial terms – and the inability to comprehend these terms can start you on the path to bankruptcy yet again.
Many consumers are not taking their financial education into their own hands – and why should they? When signing up for a credit card, loan or any other financial agreement, there can pages upon pages of jargon that, quite frankly, makes one feel as though they need a degree in finance from Harvard in order to understand it all.
Not to worry – with our list of the most essential financial terms that you should know, you can have the confidence you need to avoid falling into the credit card debt cycle again.
Annual Percentage Rate (APR): The Annual Percentage Rate is the yearly interest on your card that accounts for fees and costs that were accrued in order to secure your credit loan. The APR is different from your interest rate, since the APR factors in external fees while being calculated.
Cash Advance Fee: When you take money out of an ATM using your credit card, your lender will charge you a cash advance fee, which is usually a small percentage of the amount that you withdrew. For larger withdrawals, it’s important to know that the fee typically tops off at a certain number, so be sure to check with your lender the maximum fee that you’ll be charged.
Introductory Rate: This is exactly what it sounds like. When you shop around for a new credit card account, your potential lender will typically offer you a very attractive introductory interest rate, in the hopes of securing your business. However, many consumers get trapped in the introductory rate hype (which can often lead to more debt and, of course, bankruptcy), so make sure that you know what your interest rate will jump up to after the introductory period is over.
Universal Default: The universal default typically applies to a general interest rate that lenders can charge when you are more than one month late with payments. Be careful of universal default interest rates, since they can legally skyrocket up to 30% overnight.
When it comes to credit cards, loans and other financial terms, it pays to be in the know. Don’t just ignore the jargon and fine print that come along with your loans and debts, as this can put you on the path to drowning in debt again. Take the time to educate yourself as to what exactly those unfamiliar terms mean. Your bankruptcy attorney will thank you for it!