Glossary of Credit Card Terms
Credit card issuers are required by law to disclose certain key information to consumers. These terms are important when you want to compare credit card plans between several credit card companies. Here are some of the more important credit card terms:
APR: (Annual percentage rate) for purchases: The annual percentage rate (as a percent, divide by 12 to get monthly rate) you will be charged if you carry a balance month-to-month. If your card has an introductory rate, you will see both the introductory rate and the rate that will apply after the introductory rate expires. A credit card may have several different APR’s, many introductory plans have 0 APR credit cards.
Other APR’s: These APR’s are charged if you get a cash advance on your card, transfer a balance from another card, or are late making a payment. Additional information may be posted as a footnote, for example, if you make two consecutive payments late the credit card company may change the APR to a higher rate.
Grace period for repayment of balances (or) purchases: The number of days you’ll have to pay your credit card bill in full without triggering a finance charge. The grace period usually only applies to any new purchases you have made. Most credit cards do not offer grace periods for cash advances or balance transfers; interest charges start right away.
Method of computing the balance (or) purchases: This is your average daily balance calculated over the billing period. If you carry an outstanding balance this is your daily balance that will apply to the finance charge. The amount usually depends upon your outstanding balance and the credit card’s current APR.
Annual fee: This is the charge a credit card company imposes for using the card for a 12-month period. Other fees may also apply, such as:
*Cash advance fee: Charged when you use the card to get cash. This may be a flat fee or a percentage of the cash advance, and sometimes both.
*Balance transfer fee: When you transfer a balance from one card to the next, usually by using the ‘convenience’ checks credit cards send you. This is usually a flat fee or processing fee.
*Late payment fee: Charged if the payment is received late. (Be sure to check out the credit card’s online payment system; this feature can save a hefty late payment charge on your account).
*Over-the-credit-limit-fee: This charge is triggered if you exceed your credit limit. (Most checkout counters with swipe authorizations will not allow you to exceed your credit card limit. Be careful when using those ‘convenience checks’ to make purchases, or snail mail purchases).
*Credit-limit-increase-fee: Charged by some credit card companies if you request an increase in your credit limit.
*Returned items fee: This is basically a returned check fee (for non-sufficient funds).
*Other fees regarding online payment: Some credit card companies charge a processing fee if you pay online or by phone. Be sure to check out the payment options that the credit card company offers you.
Minimum finance charge: The minimum finance charge you ‘ll have to pay during a billing cycle (usually 30 days). A minimum finance charge usually occurs only when a finance charge is imposed, such as when you carry over a balance from a previous month. You will be charged the minimum even if the amount of your finance charge is less. For example, your finance charge may be calculated to be 35 cents, but if the company’s minimum finance charge is $1.00, you’ll still be charged $1.00.
Know what your options are with your credit cards. Reading the fine print may be a headache at first, but it will save you money and worry later.