Help

If you need any help with credit card terms, refer to this glossary.

Introductory APR: Short-term low interest rate (expressed as a yearly rate) offered by banks that serves as an incentive to their credit card offers. The interest rate will usually go up after a certain amount of time. Introductory APR can last anywhere from 3 months and up to 15 months from the time when a credit card was issued. It can be applied to purchases, balance transfers or both. Typically, Introductory APR is not offered for cash advances. In some cases, a low Introductory APR can be in effect for balance transfers and last until the whole balance is paid off. Introductory APR can be as low as 0% and as high as 9.99%.

Introductory Period: A period of time during which the Introductory APR is in effect. The interest rate will usually go up after the end of the Introductory Period. Introductory Period can last anywhere from 3 months and up to 15 months from the time when a credit card was issued. It can be applied to purchases, balance transfers or both. Typically, Introductory Period is not offered for cash advances. In some cases, the Introductory Period can be in effect for balance transfers and last until the whole balance is paid off.

Ongoing APR: APR is the way of stating the interest rate you will pay if you carry over a balance, take out a cash advance, or transfer a balance from another card. If the card has an introductory rate, the Ongoing APR will apply after the introductory rate expires. The APR states the interest rate as a yearly rate. A single credit card will have several APRs, applicable to different types of transactions: one APR for purchases, another for cash advances, and yet another for balance transfers. The APR for cash advances is often higher than the APR for purchases or balance transfers (for example, 10.24% for purchases, 10.24% for balance transfers, and 21.24% for cash advances). For example, if a card's APR is 10%, you pay 10% interest on the outstanding credit card balance. This means that if your outstanding credit card balance is $1,000 you will have to pay $100 in interest charges per year. This is a very simplified representation of how APR actually works, the actually interest charges may vary based on the type of transaction and balance computation method.

Default APR: A penalty APR. Your Ongoing APR's may increase if you are late in making payments. For example, your card agreement may say, "If your payment arrives more than ten days late two times within a six-month period, the penalty rate will apply". Defaults are a serious negative item on a credit report. Default APR may be as high as 29.74% and may be applied to all outstanding balances on your credit card.

Grace Period: The grace period is the number of days you have to pay your bill in full without triggering a finance charge. For example, the credit card company may say that you have "25 days from the statement date, provided you paid your previous balance in full by the due date." The statement date is given on the bill.
The grace period usually applies only to new purchases. Most credit cards do not give a grace period for cash advances and balance transfers. Instead, interest charges start right away.
If you carried over any part of your balance from the preceding month, you may not have a grace period for new purchases. Instead, you may be charged interest as soon as you make a purchase (in addition to being charged interest on the earlier balance you have not paid off). Look on the credit card application for information about the "method of computing the balance for purchases" to see if new purchases are included or excluded.

Minimum Finance Charge: Nearly all credit cards have a minimum finance charge. You'll be charged that minimum if the calculated amount of your finance charge is less than that for any billing cycle. For example, your finance charge may be calculated to be $0.35 but if the company's minimum finance charge is $1.00, you'll pay $1.00. A minimum finance charge applies only when you must pay a finance charge--that is, when you carry over a balance from one billing cycle to the next. It is very important to understand that having a minimum finance charge does not mean that you will have to pay it every month even if you've paid off your balance in full or made no purchases. If you've paid off your balance in full or made no purchases you will not be charged anything. Typically, minimum finance charge is $0.50.

Balance Transfer: Transfer of your debt from one credit card or a loan onto another credit card. Many credit card issuers offer introductory interest rates (introductory APRs) that are much lower than the standard interest rates. Consumers may take advantage of these lower rates to transfer balances from their higher interest credit cards to the new, lower interest credit cards to save money on interest charges. You can find a credit card with Introductory APR for balance transfers as low as 0% for up to 12 months or 3.99% until the whole balance is paid off.

Cash Advance: Cash can be withdrawn (borrowed) from your available credit card account. Typically this is done by using your credit card at an Automated Teller Machine (ATM) or a bank. The interest rate is often significantly higher on cash advances than it is on purchases or balance transfers. In addition, there is usually no Grace Period for cash advances and a transaction fee of 3% with $5 minimum and no maximum is often charged. In most cases, that makes the cost of using a credit card for cash advances too high. We do not recommend getting cash from your credit card and do it only if absolutely necessary in case of an emergency.

Balance Transfer Fee: A fee charged by a credit card company when you transfer your debt from one credit card or a loan onto another credit card. In many cases this fee is 3% of the balance amount with $5 minimum and $50 maximum. (The minimum is not charged on top of the 3%, instead it will be your total balance transfer fee if 3% of the balance transfer amount is less than $5. If 3% of the balance amount exceeds $50 your total balance transfer fee will be caped at $50.) In some cases it can be a fixed amount, for example: $75. However, it is also possible to find a credit card offer that does not charge this fee.

Cash Advance Fee: A fee charged by a credit card company when you use your credit card to get cash advances. In many cases this fee is 3% of the cash advance amount with $5 minimum and no maximum. (The minimum is not charged on top of the 3%, instead it will be your total cash advance fee if 3% of the cash advance amount is less than $5.) If you will use your credit card to send money through companies such as Western Union all your charges will be considered as a cash advance and a cash advance fee will apply. There are no credit cards that do not charge a cash advance fee.

Foreign Exchange Fee: A fee charged by a credit card company on purchases made in a foreign currency. Usually foreign exchange fee is 3% of the amount of each foreign currency purchase after its conversion into U.S. dollars with no minimum or maximum. There are no credit cards that do not charge a foreign exchange fee.

Setup Fee: One-time fee charged by a credit card company when a new credit card account is opened. Regular credit cards (for people with good/excellent credit history) almost never charge a setup fee. Credit cards for people with bad credit usually have a setup fee that can range from $29 up to $100.

Annual Fee: A fee charged by a credit card company each year for use of a credit card. Most banks have credit cards without annual fee. Annual fee may range from zero dollars to several thousand dollars, depending on the credit card offer. Certain types of credit cards, for example credit cards that offer frequent flyer miles as a reward, always come with an annual fee. Other types of credit cards, for example credit cards that offer cash back as a reward, usually have no annual fee.

Late Fee: A fee charged by a credit card company when your payment is received after the due date. In order to avoid any late fees, make sure that at least the minimum due amount, as stated on your monthly statement, reaches the credit card company by the due date. The due date is the date by which your payment should be received by the credit card company, not the date by which it should be paid. Therefore, make your payments several business days before the specified due date. Late payments have negative effect on your credit history, even if your entire outstanding balance is later paid in full. Too many late payments recorded on your credit report will significantly decrease your credit score and damage your credit history.