Below are some common terms used in credit
A yearly fee that a credit card charges for using the card. Many cards
charge no annual fee, but others such as
chase credit cards and those
offering substantial reward programs may have such a fee. Annual fees may
range widely. The consumer should always look for credit cards that do not
charge any annual fee.
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APR (Annual Percentage
Rate): This is your card's
interest rate for a year. If you have a card with an APR of 16%, you will
actually be charged a daily interest rate of .044% (16% divided by 365
days), as credit cards
actually charge finance fees on a daily basis once you've gone past the
grace period. The annual percentage rate is a bit easier to understand
however, so use that as your reference when comparing cards. If
you keep a balance on your card and do not pay it off, you will actually pay a bit more than the APR offered, because your balance will
increase daily & thus the interest will go up.
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Credit line minus the balance on your card. If you have a credit line of
$5000 and have made $2000 worth of purchases, your available credit is
It is an enticement to you as a new customer, the banks will often allow
you to transfer your existing balance to the new card at an extremely low
interest rate (sometimes as low as 0%) for a specified period of time. For
example, if you are carrying a balance of $1000 on a card with an APR of
you transfer that balance to a new card offering a transfer rate
of 0% for six months, you could save yourself a large amount of money
during that six-month period. The balance transfer rates are usually only
temporary, and any balance that remains in your account after the intro
period will then be charged at the card's normal APR.
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Allows you to use your credit card in an ATM to get cash immediately.
Credit cards offer no grace period on cash advances, and the APR on a cash
advance is generally much higher than the APR on purchases.
Cash Back or Reward
Credit Cards: Credit cards that
offer you some sort of
reward for using them. Some cards offer you cash as
percentage of your purchases made with the card, usually a small amount
topping out at 1%. There are however
credit card offers available online today that pay as high as 6% on
your retail and gas purchases. Other cards offer incentives such as
discounts on purchases based on your account activity.
High Risk Payment Processor:
Some types of transactions and "some merchants are classified as high risk" For example say you visit a bankruptcy attorney and want to charge the bill to your credit card. By defenition your own credit is likely to be poor and the risk of a chargeback or dispute will be higher. Reducing and preventing chargebacks are important to high risk merchants.
How much you can charge to your card. If you have a credit line of $5000,
you can buy $5000 worth of stuff. Your cash advance limit can be smaller
than your overall credit line. If you exceed the credit limit, you can be
charged over-the-limit fee!
Fixed rate is APR that will not change. If a card offers a fixed rate, you
know that your rate will remain the same for the length of the credit card
agreement (although terms could change in the future.) Contrast this with
the Variable Rate definition below.
The length of time in which your new purchases will not be charged
interest if you pay off your balance in full. If you buy something with
your credit card today, then pay off your
balance in full when the bill
comes due, you will not be charged any interest. Many credit cards used to
offer a 30-day grace period, but many have squeezed this down to 25
days--so pay off that balance if you can!
Secured Credit Cards:
Cards for people with a bad credit history or no credit history at all.
Secured cards , unlike unsecured credit cards, work basically as debit cards--you put money into an account
and your purchases with the card are madeagainst that money. There are
also partially secured cards--for example, if you put $3000 into your
account, your credit line may go up to $4500--and unsecured cards that do
not require a deposit but charge high fees. Any type of secured card will
charge you higher fees than a card for people with a good credit record,
but it may be necessary to get this type of card if you don't qualify for
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An APR that changes as published interest rates change. Many credit cards
with variable rates will use an APR calculation of (Prime Rate + card