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Credit Card Term Glossary
Annual Fee: This is a yearly fee to use or own a credit card or
debit card. Annual Percentage Rate (APR): This is a yearly percentage rate charged
when a balance is carried on a credit card. When there is a balance held on the
credit card this rate is aaplied to your outstanding balance each month.
Balance Transfer: This is when you move an exisiting balance from
one credit card that you own to another credit card that you apply for, usually
to get a lower APR and save money.
Balance Transfer Fee: Some credit card companies impose a one-time
fee to transfer an outstanding balance from one card to another. If there is a charge,
it is generally 1%-5% of the transfered balance or a fixed rate. Billing Cycle:
This is the time between billing statements, usually 28-31 days.
Cash Advance: A cash advance is a cash loan obtained from your
credit card, usually at a bank or an ATM. These types of transactions can be much
more costly than typical purchases, as the interest rate is usually higher and other
fees may apply.
Credit Limit: The total amount of money that may be charged onto
or held as a balance (or a combination thereof) on a particular credit card.
Finance Charge: Interest costs and other transaction fees (i.e.
balance transfer fees, cash advance fees, late fees, overlimit fees) that occur
with the use of a credit card.
Fixed Rate (or Fixed APR): A fixed annual percentage rate. A fixed
APR does not change but rather stays the same for a specified period of time. This
differs from a credit card with an "intro APR." An intro APR is a temporary, low
APR that changes to a higher rate after the introductory period (typically 3-12
months).
Grace Period: The time allowed to pay your credit card bill without
being billed a finance charge and/or late fee. It is usually 10-28 days.
Introductory Rate (or Intro APR): A temporary, lower annual percentage
rate that typically lasts from 3-12 months. After the introductory period, the APR
generally rises.
Minimum Payment: The minimum amount of money that a cardholder
is required to pay the credit card issuer each month. This number varies according
to a number of factors, but is generally based on the amount of the cardholder's
outstanding balance. A cardholder can always choose to pay more than the minimum
payment, and paying the entire balance in full is advised to avoid finance charges.
Overlimit Fee: A fee charged when your balance exceeds your credit
limit.
Prime Rate (or Prime Interest Rate): The interest rate at which
banks lend to their most creditworthy (prime) customers. The prime rate is known
to change but not on a regular basis.
Secured Credit Cards: Credit cards that require collateral for
approval. With secured credit cards, a security deposit is needed to secure the
credit card. The amount of the security deposit usually equals the credit limit
for that particular credit card. Generally, secured credit cards are for people
with no credit or poor credit who are trying to build or rebuild credit history.
Unsecured Credit Cards: Credit cards that are not secured by collateral.
Customers qualify based on credit history, financial strength and earnings potential.
Variable Rate: The opposite of a fixed rate. It is generally Prime Rate + an additional
rate. For example, if the rate of a credit card is "Prime rate + 4%," and the current
prime rate is 10%, the APR would be 14%. The prime rate varies throughout the year.
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