Glossary

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 charges.
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 Agreement.
Credit
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 debt.
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 worthiness.
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 lender.
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 limit.
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 period.
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 the cost.
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...