- Annual Membership Fee
Some credit card companies charge an annual
fee to keep your card active. This is in addition
to the finances charges. The amount can range
from $25-$75. If at all possible find a card
that does not charge and annual fee.
- Average Daily Balance
The average daily balance is computed by adding
up the balance of the account for every day
in the billing cycle (usually one month) then
dividing by the number of days in that cycle.
Most card companies use this to determine finance
- APR (Annual Percentage Rate)
You pay for the money you borrow from a credit
card company. The annual percentage rate is
that number for a year. The APR can be either
a fixed rate or a variable rate.You can find
out the APR by reading your statement. It will
be different from your monthly rate.
- Balance Transfer
Taking the balance on one open credit card and
moving it to another card. Often used to save
money on finance charges. May be done by special
checks or electronically.
- Billing Cycle
The number of days between the last statement
date and the current statement date.
- Card holder agreement
Terms and conditions related to your credit
card account. It contains such information as
APR, finance charges, fees and penalties and
your rights in case of a dispute.
- Cash Advances
Money given directly to the card holder rather
than to a merchant. The credit card company
usually charges a higher fee on this kind of
loan, and there is usually no grace period.
The details will be noted in your Card Holder
Purchasing merchandise, or borrowing cash with
the understanding that it will be paid for at
a later time. Credit usually costs additional
fees and finance charges to cover operating
costs by the creditor.
- Credit Bureau
A company that collects and distributes credit
information on people who use credit. The data
includes credit history, work history, length
of time in residence, legal issues and other
items influencing the determination of allowing
credit. Released to interested parties in the
form of a credit report...
- Credit History
Your credit report over a period of time, generally
7-10 years. Representing your credit behavior
good, or bad. The amount you owe and how well
you handle your credit.
- Credit Insurance
Insurance covering the debt on a credit card
should the borrower become disabled, lose his
job or dies. Sometimes it covers the payment
while interest still accrues, sometimes it covers
the entire debt. It is an optional policy that
costs extra, usually a percentage of the current
- Credit Limit
The amount a credit card issuer will allow you
to borrow as merchandise and cash advances.
It is determined by reviewing your credit report.
- Credit Report
The report provided by credit bureaus which
includes your credit history given to a variety
of interested parties who determine your credit
- Daily Periodic Rate
The interest rate factor used to calculate
interest charges on a daily basis. The factor
is computed by dividing the yearly rate by 365
days. Used by the Discover card, but few other
cards, this method of computing interest can
result in an effective annual percentage rate
which is approximately 2% greater than the yearly
stated rate of interest.
- Debit Card
Also known as a check card. It has direct access
to the bank account of the card holder. It provides
payment but does not incur debt
- Finance Charge
The cost to borrow money. Can be in addition
to interest and transaction fees.
- Fixed Interest Rate
A rate charged for money borrowed. A fixed rate
does not go up and down without a 15 day disclosure
from the credit card company.
- Variable Interest Rate
Rate charged for money borrowed. It can rise
and fall with market rates determined by the
- Grace Period
The time a credit card company gives you between
purchasing an item and having to pay interest
on that item. Usually 20-25 days but generally
only helps you save money if you pay off your
balance in full each month.
- Introductory Rate
A rate, generally lower than average going rate
designed to encourage people to obtain a certain
card. After the introductory period the interest
rates jump to a much higher rate. Lower rates
are usually lost if you make late payments.
Can be useful for saving money only if you pay
attention to the expiration date and move your
debt before the higher rate comes into effect.
- Monthly Periodic Rate
A rate used to determine the interest charges
on credit card balances. Found by taking the
annual rate and dividing by 12.
- Over-Limit Fee
An additional charge levied against your account
if the balance due exceeds your official credit
- Late (Payment) Fee
An additional charge levied against your account
for making monthly payments after due dates.
The fee varies depending on the card provider.
- Periodic Rate
The rate applied to your outstanding balance
to figure the finance charge for each billing
- Prime Rate
The cost of money, determined by the government,
for a banks best or “prime” customers.
- Secured Card
A credit card that has been guaranteed by the
cardholders’ deposit of money in a savings
account... A good way for people with no credit
or poor credit to build a better credit history.
The money is available as long as the cardholder
pays on time. If the cardholder defaults on
paying, the issuer can take the deposit to defray
- Teaser rate
An introductory rate designed to encourage people
to obtain the card. Usually considerably below
market rate, it is short term rate that will
expire and increase.
- Transaction date
The date when purchase of good or services,
or cash advances were made.
- Truth in Lending Act
Designed by the federal government to make sure
that consumers would have honest, accurate,
standardized information regarding lending practices
Facts that must be included are finance charges,
annual percentage rates, length of grace period,
fees and finance charges.
- Two-cycle billing
A rarely used form of charging interest on credit
cards. Includes 2 billing periods and effectively
cancels out any grace period for customers who
carry a balance...