3 Important Things to Know About Your Credit Card

Over the last few decades, the convenience of credit cards has made them a popular alternative to cash.

But what you may not realize about credit cards is that using them means taking on debt with ultra-high interest rates. For example, in late 2025, the average credit card APR was a jaw-dropping 21.39%. By comparison, personal loan rates averaged 11.14% and car loans were below 8%.

On top of that, many credit cards have annual fees and late payment fees, and missing just one payment can do serious damage to your credit scores. In other words, using credit cards can mean getting yourself into serious financial trouble if you’re not careful.

What’s the key to using a credit card responsibly? It’s knowing exactly what you’re getting into before you apply, and aiming to pay off your full account balance each month. To avoid credit card trouble, here are a few of the main features you need to understand.

1. How credit card APR determines your interest charges

The annual percentage rate (APR) on your credit card determines how much interest you’ll be charged if you carry a balance from one month to the next. 

For example, if your credit card has 20% APR, you’ll be charged 20% of the balance. So on a credit card where you owe $3,000, 20% APR would be calculated as a monthly charge of almost $50. Even worse, if you make minimum payments of just $60 a month, it would take you 111 months to pay off that card and it would cost you over $3,600 in interest charges alone. 

But keep in mind that different types of credit card purchases have different APRs. For cash advances, that APR is usually near 30% and the interest charges accrue from the day of the cash advance until you pay back the full advance amount.

Additionally, cards with 0% introductory APR can be more expensive than you might think. Why? Because some of these cards only offer introductory APR on balance transfers, and not on purchases.

Want a lower APR on your credit card? Here are a couple of ways to get a better rate:

• Improve your credit: Work on improving your scores before applying for a card.
• Talk to a credit counselor: Schedule an appointment with an NFCC-certified credit counselor to review your credit reports and get personalized tips for gaining points. 
• Try a credit union: The average credit card APR is about 14% at credit unions versus 25% at banks.

Alternatively, you might consider taking out a debt consolidation loan to pay off your credit card debt, since personal loan rates are typically much lower than credit cards.

2. What a grace period is and how it can help you avoid interest

Many credit cards — though not all — have a grace period, meaning there’s a period where you can pay off your balance and avoid interest charges. For most cards, the grace period extends to the end of the billing cycle (your payment due date), which is typically 21 days after the bill is issued.

The credit card grace period comes with a few caveats you need to know about:

• You must pay off your entire card balance to avoid being charged interest. 
• If you pay anything short of your full balance, you will lose your grace period for the current month and the following month, and you’ll be charged interest on new purchases starting on the date of the purchase.
• The grace period generally applies to purchases only. Any transferred balances or cash advances will likely start accruing interest right away. 

To learn more about the grace period on your credit cards, check your cardholder agreements and look at the details for each type of purchase.

3. Which credit card fees and penalties to look out for

Beyond interest fees, each credit card comes with a variety of other costs that can catch you unaware without the right research. These include:

• Cash advance fee: Usually 3% or 5% of the transaction amount.
• Balance transfer fee: Usually 3% or 5% of the total transfer amount.
• Annual fee: Varies by credit card and can range from $0 to several hundred dollars.
• Late payment fee: Can be in the range of $30 per late payment.
• Foreign transaction fee: Some cards charge around 3% on purchases made outside of the U.S.
• Penalty APR: A higher interest rate (usually 29.99%) that can kick in if your payment is late.

If you choose your credit card wisely, and you familiarize yourself with each credit card fee, you may be able to avoid these extra charges.

A credit counselor can help 

If you’re struggling with your credit card payments, don’t hesitate to contact an NFCC-certified credit counselor today! NFCC-certified counselors can conduct thorough reviews of your finances and credit, and they’ll offer you professional and personalized advice for how to improve your situation.