Selecting the most suitable credit card for your situation can seem daunting. There are a vast array of options, many unfamiliar terms, and a lot of fine print. Coming to a better understanding of credit card terminology will help you find the best card for you. Take a look at this abbreviated credit card glossary to learn more about the terms and conditions that can either keep you out of debt or, if not properly understood, put you deep in the hole (for a comprehensive A-Z credit card glossary then visit our credit card terms page).
Annual Percentage Rate (APR): the amount you will pay in interest charges per year. Credit card issuers approach APR in various ways. Some have a fixed interest rate, though this does not mean the rates won’t change; it simply means the issuer will give you a certain amount of notice before any change occurs. There are also variable interest rates, which are determined by the intricacies of the federal treasury.
Balance Transfer: the transfer of all or part of your debt from one credit card to another card with a lower interest rate.
Credit Rating: an evaluation of your credit history designed to assess your level of risk to a lender which is then expressed as a numerical credit score.
Double Cycle Billing: takes into account the average daily balances from the previous billing period in addition to the current balance. Essentially, it is interest charged on paid debt.
Equifax: one of the big three credit bureaus. Credit bureaus collect and sell your personal and financial information.
Finance Charge: the cost of using a credit card. This formula takes into account factors and fees such as the interest rate and your average daily balance.
Grace Period: the length of time during which you can pay off the balance of your card without being hit with late fees.
Hacker: a programmer who breaks into computer systems in order to steal information; popular targets for hackers include credit card information and personal details (click here to see the punishment for credit card hackers).
Interest Rate: the monthly percentage that a credit card issuer charges a consumer for borrowing money.
Joint Credit: money loaned to a couple based on their combined assets, income and credit scores. Both parties are liable for the debt.
Late Payment Fee: a charge for not paying on time. Rates typically fall between $20 and $40 per late payment, depending on the card.
Minimum Payment: the smallest amount you can pay while keeping your account current. The rate is often determined by a percentage of your outstanding balance (2% is common) or a minimum fixed amount (click here to calculate your credit card minimum payment using our free credit card minimum payment calculator).
New Balance: the amount you owe as determined by factors including your previous balance, payments and credits made in the past 30 days, interest and fees.
Online Bill Payment: the use of the Internet to pay bills such as those incurred through your credit card. By paying on-line with money withdrawn from your bank, the need for checks, stamps, envelopes is eliminated and time is saved.
Pre-Approved Credit Card Offer: a marketing method whereby credit card issuers use personal and financial information gleaned from a credit bureau to find consumers who seem like a good match for a particular credit card. But pre-approval does not necessarily equal ultimate approval. If you receive an appealing offer in the mail, you must fill out the application which may or may not be approved pending a more thorough credit check.
Remaining Balance: unpaid principal on a loan.
Sub-Prime Borrower: a consumer with poor credit who is deemed to be a high credit risk. Sub-prime borrowers are often charged higher interest rates and are often eligible for bad credit credit card offers rather than credit card offers for those with excellent credit.
Truth in Lending Act: legislation passed in the United States that mandates a certain level of transparency from credit card issuers. Under this act, companies must disclose their finance charges, how they compute the charges, and when they are imposed. The total of the charges must be represented by a percentage of the annual percentage rate (APR).
Unsecured Debt: loans not backed up by the security of collateral. Credit cards are largely unsecured debt (although both unsecured credit cards and secured credit cards are marketed heavily by many different issuers).
Variable Rate: an interest rate determined by fluctuations in Federal indicators like the US Treasury bill index.
Wall Street Journal Prime Rate: one of the most well-respected calculations of the prime rate determined by surveys of large banks.
Zero Balance: a credit card statement in which the outstanding balance is at zero and no new charges have been made during that billing cycle.
Now that you understand the terminology of credit cards then use our free online credit card finder. By using an online tool to examine credit card offers from many different issuers, you will find all the terms laid out against each other, allowing you to make the most informed decision possible. The terminology represented above will be found throughout the conditions of all the credit card offers. A careful comparison will lead you to the best credit card for you. Compare offers today with our free credit card finder!