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Credit Cards

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Below are definitions of the most common terms associated with credit cards. Familiarizing yourself with the terms will help you understand how credit cards function, ultimately allowing you to choose the best credit card deal for your needs.

Adjusted Balance
You can figure out what what your adjusted balance is by subtracting payments made during your current billing cycle from the balance from the previous billing cycle. Any purchases you made during the current billing cycle are not included.

Annual Fees
Most credit cards that offer any type of reward will have recurring annual membership fees. The fees associated with every type of card is going to be different and can range from $25 - 50. If a card is a 'platinum' or 'gold' card you can expect to pay as much as $150.

Annual Percentage Rate
Cost of credit calculated as a yearly rate. You will be notified of the APR when you apply for any credit card. Also, the APR will always be listed on your monthly statements.

Average Daily Balance
This allows you to calculate how much your finance charges are. Your account is credited from the day your payment is received by the credit card company. The balance is calculated by totaling the beginning balance for each day in the billing cycle and subtracting any credits made to your account that day. These balances are added for the billing cycle. The 'average daily balance' is determined by dividing the total by the total numbers of days in the month.

Balance Computation Method for the Finance Charge
This is how the finance charges are calculated. Each credit card will have a different method for computing their finance charges. It is your responsibility to determine how this is done.

Credit Card Insurance
Offered by most major credit card companies. Will help you pay your credit card bill in case you ever get sick ort lose your job. Learn more about credit card insurance.

Grace Period
Also known as 'free period'. If you pay your credit card balance in full before the grace period ends, you will avoid paying finance charges.

Period Rate
This is the rate that is applied to your outstanding balances to determine what your finance charge is for the billing cycle This 'periodic rate' must be disclosed to you by your credit card issuer.

Previous Balance
This is the amount you owed from the last billing period. Any credits, payments and/or new purchases from the current billing cycle are excluded. It is also common for unpaid finance charge to not be included.

Prompt Credit for Payment
Your account must be reflective of any payments made as soon as the payment is received by the credit card issuer.

Special Delinquency Rates
When you do not pay your credit card bill on time, you will receive a higher interest rate called 'delinquency rates' otherwise known as 'default rates'. Learn more about the delinquency rates. These higher APRs can exceed 20%! So make sure you pay your credit card bill on time! You can find out what the special delinquency rate of a credit card if by examining the terms and conditions of your card.

Transaction Fees and Other Charges
These are additional fees imposed by the credit card issuer for cash advances, late payments, ATM withdrawals, and/or when you exceed your credit limit.

Variable Rate
This is an interest rate that is based on economic markers, like 'prime'. Your interest rate will either go up or down, depending on the activity of these economic markers.

Learn More Finance Terms:
Car Insurance Glossary
Auto Finance Glossary



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