Here’s a great credit card “cheat sheet” that defines the major things you need to know when it comes to credit cards. We highly recommend printing this page so you can keep it with you as you read. Don’t have a printer? No problem! Just keep this page open in a browser window for quick reference.
Don’t worry if some of these terms sound foreign to you. We expand on each topic as you read along. By the end of this chapter, these credit card vocab words will become second nature to you. You’ll repeat them as effortlessly as you can repeat your best friend’s phone number!
- Annual Fee – Yearly fee paid to the credit card company for a credit card. Most credit cards do not charge an annual fee.
- Annual Percentage Rate – The interest rate charged to credit card debts.
- Available Credit – The difference between your credit limit and card balance. A credit card with a $1,000 credit line would have $300 of available credit if the card had a balance of $700.
- Balance – The total amount owed to pay off a credit card including interest and finance charges on any outstanding credit card transactions.
- Balance transfer – The ability to transfer a balance from one credit card to another, often for a lower interest rate.
- Billing Cycle – The number of days between credit card statement dates. Billing cycles are now mandated by law to remain the same length of time.
- Billing Statement – A monthly bill from your credit card issuer detailing the amount owed on your credit card. The billing statement also shows pertinent information about your transaction history.
- Cardholder Agreement – A contract between the cardholder and issuer included in the same envelope as most credit card offers.
- Cash Advance – A cash loan from a credit card usually received through an ATM. Cardholders can borrow small amounts of money in cash via an ATM or paper check, and often pay a very high interest rate for the service.
- Cash Advance Fee – A flat fee (often 3-5% of the total cash advance) a credit card company charges for a credit card cash advance. Credit card companies also charge interest on top of this flat-rate fee.
- Charge Card – A card that allows for delayed payments for purchases on credit, but does not allow for long-term borrowing. Charge cards must be repaid within one-month, and are not intended for long-term borrowing.
- Credit Card Debt – The amount left on a credit card after the grace period has expired.
- Credit History – A record of your ability to responsibly borrow money.
- Credit Limit – The amount of money you can charge to a credit card.
- Delinquent Account – An account that has not been maintained adequately to keep up with the requirements of a cardholder agreement. Most delinquent accounts are the result of late payments.
- Due date – The date that a credit card bill is due.
- Finance charges – The total amount paid for servicing the debt. Finance charges are fees and expenses that a credit card company charges to finance transactions and maintain your account as it relates to your spending habits.
- Grace Period – The amount of time in which a customer can have a credit card balance without paying interest or finance charges. In general, the grace period is equal to one billing cycle.
- Late Payment – A payment received after the payment due date.
- Late Payment Fee – A fee of up to $35 charged to a credit card when the cardholder is late with payments due on his or her card.
- Minimum Monthly Payment – The smallest payment one can make to their credit card. Making the minimum monthly payment avoids delinquency, but not interest charges to your account.
- Outstanding Balance – The total amount owed to pay off a credit card at a particular statement date.
- Over-the-Limit Fee – A fee charged to accounts that have balances greater than their credit limit.
- Periodic Rate – An interest rate for a specific period of time. Often, the periodic rate for credit cards is the Annual Percentage Rate divided by 365 days. Thus, the periodic rate reflects the amount of daily interest charged to a credit card.
- Previous Balance – The total unpaid amount remaining from the previous statement.
- Revolving Credit – Any loan, line of credit, or credit card that allows for borrowers to increase and decrease their borrowing at the borrower’s discretion.
- Secured card – A credit card that is secured by a borrower’s collateral – often a small amount of cash stored safely in a bank account.
- Transaction date – The date a purchase was made, or the day on which the transaction was recorded by the credit card company.
- Unsecured credit card – A card that has not been guaranteed by a borrower’s collateral or deposit.
- Variable Interest Rate – A rate of interest that moves up and down depending on the market rate of interest at any one time.
- Zero balance – A credit card that has been paid off in whole.
