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CREDIT CARD TERMS
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:
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