Glossary of Credit Card Terms

Annual Fee
A recurring fee charged once a year for maintaining an account and for any special services. Fees vary depending upon the issuing company and the services provided.

APR (Annual Percentage Rate)
The is as an annual rate that is used to calculate the finance charge on an outstanding balance.

Authorization
Permission given by the credit card issuer for a merchant or another affiliate to complete a credit card transaction.

Available Credit
The amount of credit available. Available credit is determined by subtracting the outstanding balance from your total credit limit.

Balance
A credit card balance refers to the amount owed.

Balance Transfer
Using the available credit on one credit card to pay off the outstanding balance on another credit card.

Billing Cycle
The number of days in the billing period.

Card Holder
A person to whom a credit card is issued.

Cash Advance
Cash loan taken out of a bank or credit card balance. Grace periods are not available for cash advances. Interest starts accruing immediately and at a higher APR until the complete balance is paid in full.

Credit
An agreement to repay a debt for purchases you make. It allows you to buy something today and pay for it later.

Credit Bureau
An agency that keeps a data base of information on credit card owners and their borrowing and spending habits. Based on the information in their database, Credit Bureaus create reports that are used to determine the amount of credit that will be issued to the applicant.

Credit Line
Also known as Credit Limit, this is the maximum amount you are allowed to borrow on your credit card.

Credit Score
Also known as a credit rating. It is a calculation of your credit report that is used to determine your credit history, risk, and ability to repay a loan.

Finance Charge
Finance charges are the fees charged for borrowing money on credit card or loan. Finance charges are also known as interest.

Grace Period
The period of time after the loan payment’s due date where a payment can be made without late fees.

Interest
Interest is the fee charged for borrowing money on a credit card or loan. It is also known as a finance charge. Interest owed is found on your credit card bill as the Monthly Finance Charge.

Interest Rate
It is a percentage over time that the issuing company charges a customer for borrowing money. See also Annual Percentage Rate.

Introductory Rates
An Introductory Rate is a temporary low rate that is used introduce a customer to a particular credit card. After the introductory period is over, the rate will typically return to the standard rate. Be sure to read all stipulations for a credit card before applying so that you understand how long the introductory period will last and what the rate will be.

Issuer
An issuer is the company which issues credit cards.

Late Payment Fee
The extra fee charged for not paying a bill by the due date.

Monthly Finance Charge
The monthly fee charged for having an outstanding balance on your credit card.

Minimum Monthly Payment
The minimum payment required each month by the credit card’s due date. The amount is based on the percentage of your Outstanding Balance or a minimum fixed amount.

Outstanding Balance
The amount you owe on your credit card.

Over the Credit Limit Fee
The fee charged if your outstanding balance goes above your credit limit.

Payment Due Date
The date when your payment must be received by the issuer to avoid a late payment fee

PIN
Personal Identification Numbers are a numeric password that allows a credit card holder to access their accounts using ATMs. 

Prime Rate (or Prime Interest Rate)
The interest rate at which banks lend to their clients who have the best credit.

Secured Credit Cards
Credit cards that are backed up by the applicant’s collateral in case of default.

Unsecured Credit Card
A credit card that is not secured with collateral. The majority of credit cards are unsecured.


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