Whether you want to buy a new card or keep an eye on the one you already have, these are the key terms you need to know to manage your credit cards.
APR – Annual Percentage Rate
The APR, or annual percentage rate, is a way to compare the cost of loans. It allows you to compare the cost of loan products on a "comparative" basis. The credit card company must disclose the APR before you agree to use the card. To calculate the APR, the interest rate and fees are compared to the amount you borrow and calculated over a year. This allows you to compare the costs of a credit card with those of a six-month loan. It is also why APRs are usually different from simple interest rates.
Balance transfer
A balance transfer lets you move an outstanding balance from one credit card to another, sometimes for a fee. The fee is usually a fixed amount or a percentage of the transferred amount. Credit card companies may offer zero-interest or low-interest balance transfers—for a limited time—to encourage you to consolidate your debt onto a single credit card. Afterward, the interest rate on your new credit card may increase, raising your monthly payments.
Credit balance
A credit balance is an amount your card issuer owes you. Each time you make a payment, a credit is added to your account. Credits can also be added when you return something you bought with a credit card, due to rewards you've earned, or because of an error on a previous bill. When the total credits exceed the amount you owe, your statement shows a credit balance.
Credit Card Interest Rates
The interest rate on a credit card is the price you pay for borrowing money.
Daily interest
Some card issuers calculate account interest using a daily periodic interest rate, which is used to calculate interest.
Grace period or dead time
A grace period is the time between the end of a billing cycle and your payment due date. During this time, you cannot be charged interest as long as you pay the full balance by the due date.
Rate of interest
The interest rate on a credit card is the price you pay for borrowing money. Interest rates are usually expressed as an annual percentage rate (APR). With most cards, you can avoid paying interest on purchases by paying your balance in full each month before the due date.
Pre-selected credit card offer
A pre-screened credit card offer is when credit card companies use information from credit reporting agencies to make you firm credit offers, if your credit history meets the criteria selected by the card company.
Unauthorized use
In general, unauthorized use is the use of a credit card by a person who is not entitled to use it.
