Credit Card Glossary - Definitions of Credit Terms

Credit Card Glossary

Definitions of common credit card terms

Explanations for and definitions of terms used when describing credit cards. For additional information about credit cards, visit our new credit cards FAQ section.

Glossary of Terms

Annual Fee: A yearly fee to own/use a credit card.

Annual Percentage Rate (APR): The yearly percentage rate imposed when a balance is held on a credit card. When an outstanding balance is held, this rate is applied to your outstanding balance each month.

Balance Transfer: The movement of an existing balance from one credit card to another credit card, usually to obtain a lower annual percentage rate (APR) and, in turn, save money.

Balance Transfer Fee: A one-time fee charged by a credit card company to transfer a balance from another account to that particular credit card. It is generally 1% to 5% of the transferred balance (sometimes up to a certain dollar value). For example, a balance transfer fee could be 3% of the transferred balance up to a maximum of $50. Not all credit cards charge this fee.

Billing Cycle: The time between billing statements, usually 28-31 days.

Cash Advance: A cash advance is a cash loan obtained from your credit card, usually at a bank or an ATM. These types of transactions can be much more costly than typical purchases, as the interest rate is usually higher and other fees may apply.

Credit Limit: The total amount of money that may be charged onto or held as a balance (or a combination thereof) on a particular credit card.

Credit Report: A report of an individual's credit history that is used to determine that individual's creditworthiness.

Debt Consolidation: The act of replacing (consolidating) several loans (debts) with one.

Finance Charge: Interest costs and other transaction fees (i.e. balance transfer fees, cash advance fees, late fees, overlimit fees) that occur with the use of a credit card.

Fixed Rate (or Fixed APR): A fixed annual percentage rate. A fixed APR does not change but rather stays the same for a specified period of time. This differs from a credit card with an "intro APR." An intro APR is a temporary, low APR that changes to a higher rate after the introductory period (typically 3-12 months).

Grace Period: The time allowed to pay your credit card bill without being billed a finance charge and/or late fee. It is usually 10-28 days.

Introductory Rate (or Intro APR): A temporary, lower annual percentage rate that typically lasts from 3-12 months. After the introductory period, the APR generally rises.

Minimum Payment: The minimum amount of money that a cardholder is required to pay the credit card issuer each month. This number varies according to a number of factors, but is generally based on the amount of the cardholder's outstanding balance. A cardholder can always choose to pay more than the minimum payment, and paying the entire balance in full is advised to avoid finance charges.

Overlimit Fee: A fee charged when your balance exceeds your credit limit.

Prime Rate (or Prime Interest Rate): The interest rate at which banks lend to their most creditworthy (prime) customers. The prime rate is known to change but not on a regular basis.

Secured Credit Cards: Credit cards that require collateral for approval. With secured credit cards, a security deposit is needed to secure the credit card. The amount of the security deposit usually equals the credit limit for that particular credit card. Generally, secured credit cards are for people with no credit or poor credit who are trying to build or rebuild credit history. You may build, rebuild or re-establish credit by making on-time payments to all of your creditors and maintaining your balances under the credit limit.

Universal Default: A clause that allows a credit card company or issuer to increase interest rates on a cardholder's account because that cardholder has new, negative history (such as a missed payment) on any credit card or loan that they own.

Unsecured Credit Cards: Credit cards that are not secured by collateral. Customers qualify based on credit history, financial strength and earnings potential.

Variable Rate: The opposite of a fixed rate. It is generally Prime Rate + an additional rate. For example, if the rate of a credit card is "Prime rate + 4%," and the current prime rate is 10%, the APR would be 14%. The prime rate varies throughout the year.

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Credit Card Information and Resources

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Credit Card Issuer Information
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Credit Card Glossary
Confused about a specific credit card term? Find definitions to common credit terms here.


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