Credit Card Glossary
Annual Fee - A yearly charge for the privilege of using a credit card. Charged every 12 months, usually against the balance on your card.
Annual Percentage Rate (APR) - The yearly interest rate paid on the outstanding balance on your credit card.
Balance - The amount of money you have spent on your credit card, which has not been paid off.
Balance Transfer - Taking the balance off of one credit card and putting it on to another credit card.
Billing Cycle - The time between credit card billing statements. Usually lasts 25 days to one month.
Cash Advance - Getting cash off of a credit card through an ATM. The money is deducted from your available credit limit and usually involves a small fee and is subject to a higher interest rate. All other balances on your card must be paid down before you can pay off your cash advance amount.
Charge Card - A type of credit card where the outstanding balance must be paid off every month.
Co-Branded Card - A card that is branded by both a bank and a merchant. An example would be the Bank of America US Airways Visa Signature card.
Co-Signer - Someone who signs on to a credit card application as a second party who promises to repay the balance if the original borrower defaults.
Credit - Agreement where a lender allows a borrower to spend money and the borrower agrees to pay it back within terms.
Credit Application - A form you fill out in order to be considered for a credit agreement.
Credit Card - A card that gives you access to the money from your credit agreement.
Credit History - Symbolizes your past credit agreements. Can range from a “great” credit history, to a “poor” credit history, to “no” credit history.
Credit Card Insurance - Insurance you can purchase to protect yourself if you are unable to pay your credit card bills due to hardship. If you get sick or lose your job and are unable to pay your credit card bills, credit card insurance can protect you from default.
Credit Limit - The amount of money attached to your credit agreement. It can go up or down depending on your spending habits and payment history. You will incur additional fees for spending beyond your credit limit.
Credit Report - A record detailing your past credit history.
Credit Reporting Agencies - Companies that maintain and update your credit report to share with lenders. The major three credit reporting agencies in the US are Experian, Equifax, and TransUnion.
Credit Score - A numerical value symbolizing your perceived credit worthiness based on your credit history. Also known as your credit rating.
Debit Cards - A card that can be used like a credit card, except that it is attached to your bank account, instead of a line of credit. What you spend is real money out of your bank account, instead of borrowed money to be paid back.
Default - Failure to repay your credit card bills according to the agreed upon credit terms.
Finance Charges - Charges placed on your account due to interest.
Fixed Rate - An interest rate that does not change as market rates change.
Grace Period - A window of “free” time that you are given to pay the minimum monthly payment on your credit card statement before late payment charges kick in.
Interest - The fee that you are charged for carrying a balance on your credit card. The interest amount will depend on your outstanding balance and the APR that you agreed to.
Introductory Rate - A special low rate that you can take advantage of when you first sign up for certain credit cards. This period only lasts for a short period of time before your regular rate kicks in.
Issuer - The company who you agree to terms with when you open a credit card.
Minimum Payment - The least amount of money you can pay on a credit balance in a given month. This amount must be paid before your payment due date in order to avoid late payment charges.
Previous Balance - The total amount owed at the end of your previous billing cycle.
Prime Rate - The lowest rate offered by a lender, which is offered only to their most credit-worthy customers.
Principal - Your credit balance minus ‘extras’ such as interest and other fees.
Rewards Program - A program that gives credit customers incentives for using their credit cards. Points are usually issued to the consumer when he spends money on the card, and those points can be redeemed for rewards or cash.
Secured Cards - A type of credit card that requires an initial deposit that is usually equal to the credit limit on the card. The deposit is kept by the lender and applied towards your balance if you default on the card.
Transaction Fees - Fees charged to you for certain transactions. For example, you are usually charged a fee when you get take out a cash advance or transfer a balance from one card to another.
Variable Rate - An APR that fluctuates as market rates go up or down.
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