Flexible Credit

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With credit cards though this is in effect exactly what does happen, there is not a set term with a credit card, so you can choose to use it for as long as you like. A problem may occur if you are easily tempted to spend as you may find that you are always at the maximum of your credit card limit and may struggle to ever reduce your balance. Another disadvantage is for this "flexible credit" you would normally pay a higher rate of interest. A personal loan for instance may be around 7% APR, where a credit card would more likely be 17% APR.
Although the interest rate on a credit card may not always apply, and if you pay off your balance on time and in full each month you are effectively securing yourself Interest Free Credit as most credit cards do not have an annual fee.

In addition to this purchases are not always added straight away to your statement and for example if your credit card statement is produced on the 20th of the month then any purchase from say the 15th of the month may actually be added to the following month. From the date of your statement you would usually expect around 14 days before your payment needs to be received at the credit card provider and so in some cases you could have over a month of credit, for which you may not actually have to pay any interest.

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Updated on 22nd May, 2009

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