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Commonly Used Credit Card Terms



Commonly Used Credit Card Terms

Whether you’re a young adult who’s beginning to build a credit history or have just come out of a bankruptcy and you’re overwhelmed with what the various terms are that credit card companies use, we thought this would be a good time to put together an updated list of some of the latest credit card terminology. With so many changes in the banking and credit card industry as a whole, it’s now more important than ever to understand these dynamics.

The Most Common Terms

If you’re new to the credit card game and are not quite sure of what the difference between a minimum finance charge and a minimum payment is, this first glossary is for you.

Card Member Agreement/Terms of Use: This is what is sometimes referred to as the “small print.” It spells out in great detail everything from dispute resolution, your right to cancel and the formula used when calculating monthly minimum payments. It’s required by federal law.

Annual Fees: Most credit cards have in place an annual fee. They vary greatly, so be sure to check what each offer’s fees are.

Annual Percentage Rate (APR): This is the amount of money it costs you to use a particular financial institution’s credit cards. It’s calculated on an annual foundation and is applied each month based on your card balance. Looking for a prepaid credit card that has no APR? We recommend the Prepaid Visa RushCard.

Fixed APR: This is a fixed rate that’s not subject to fluctuations as other traditional APRs.

Intro APR: This is a marketing effort credit card issuers sometimes offer to entice new customers. Usually, it equates to six or twelve months of reduced or zero finance charges. Like the idea of an interest free card for 15 months? Check out the Discover More Card.

Minimum Finance Charge: This is a flat rate that’s used if your balance doesn’t trigger a specific dollar amount for interest charges. If your balance is low and only generates a few cents in interest, the credit card company will instead apply the minimum finance charge (usually less than $1).

Minimum Payment: This is the bare minimum you are required to pay each month on your credit card. Your balance plays a role in what that minimum payment ultimately is from month to month.

Grace Period: This is the time between your monthly statement being prepared and the date you should make that payment by. This usually is around twenty days.

Credit Cards and Banking

Credit Line: This is sometimes used synonymously with a “credit limit” and indicates how much you are approved for.

Cash Advance: This is exactly as it sounds – an advance from your credit card taken in cash.

PIN: This is your personal identification number and is used anytime you use your credit card as a debit card or when you use it to withdraw cash from an ATM.

Other Credit Card Terminology

Charge-back: A charge back occurs when your credit card has unauthorized transactions. The bank or credit card issuer will charge back those charges that you did not authorize.

Credit Monitoring Service: These companies, through any number of formulas and algorithms, will alert you when suspicious activity appears on your credit account.

Credit Freeze: This is an option that allows a card holder to “freeze” his account in an effort to protect his credit history after fraudulent activity occurs. The consumer can remove a credit card freeze when he’s certain the issues are resolved.

Secured Credit Cards: These are credit card offers that those with lower credit scores can take advantage of. It includes a matching bank account that serves as collateral. Looking for a secured credit card that will guarantee automatic reporting each month to the three credit bureaus? Check out the benefits of the Applied Bank Secured Visa Credit Card.

Of course, these are but a few of the many terms used in the credit industry. The more you know and understand, the better able you are, as a consumer, to make the best financial decisions for you and your family. Do your homework, understand the fine print and make responsible choices so that your money is always working for you.

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