Credit Card Terminology

Written by: Rudy Freeman - on July 28th, 2006

When filling out a credit card application, you will encounter the following terms in the card agreement. Make sure you read the terms and agreement thoroughly before you apply.

APR (Annual Percentage Rate)
The annual interest rates that are applied to your credit card balance if you don't pay it off before grace period expires. Usually the APR for purchases is different from APR for cash advances. Some credit cards also offer introductory APR for balance transfers.

Variable Rate vs. Fixed Rate
It should be stated in the agreement that either the rates are variable (change over time) or fixed (never change).

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Grace Period
The number of days you have to pay off the balance before there will be any interest charged to your account. Grace period is usually applied only to purchases, not cash advance or balance transfers.

Annual Fee
A fixed fee you have to pay every year to carry the card. This fee is charged to your account regardless of whether you use the card or not.

Transaction Fee for Cash Advances
A fee that is charged to your account when you use cash advances, usually a percentage of the cash amount subject to minimum and maximum limits.

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Minimum Finance Charge
When you can't pay off the balance each month, there'll be a finance charge. This is the minimum charge to your account even if the interest accrued is less than that.

Other Fees
There may be other fees such as Balance Transfer fee, Late Payment fee, and Over-Credit-Balance fee. These should be explicitly stated in the agreement.