Credit Card
Cracking the code of credit card definitions can be hard, especially when different credit card companies use different terms to describe the same thing. This helpful guide aims to simplify these terms so you can better manage your credit card and enhance your financial confidence.
Annual Percentage Rate (APR)
The Annual Percentage Rate (APR) is the yearly interest rate your credit card issuer charges you on your credit card balance. Most cards feature a variable APR, meaning it might change over time based on economic factors.
Authorized user
An authorized user is typically a family member or friend to whom the account holder has given permission to use their credit card account. The authorized user gets their own credit card, which is connected to the primary cardholder’s account.
Balance
Your credit card balance, or statement balance, is the amount of credit you’ve used on your credit line.
Balance transfer
A balance transfer is when you move a credit card balance from one card to another, usually at a lower APR.
Billing cycle
The billing cycle is the time between one credit card bill and the next.
Cash advance
A cash advance is when you withdraw money using your credit card, usually through an ATM.
Cash advance APR
The cash advance APR is a specific annual percentage rate for getting a cash advance with your credit card. This rate is generally higher than the regular APR, and interest begins accruing immediately after you withdraw the money.
Credit limit
The credit limit is the maximum amount your credit card allows you to charge.
CVV number
The Card Verification Value (CVV) is a security feature on your card that helps prevent fraud and identity theft.
Interest charge
An interest charge is the total interest you’ve accrued on your balance in a billing cycle.
Introductory APR
Credit card issuers may offer an introductory APR, which is a promotional annual percentage rate to attract new customers. It often starts at a low or even 0% rate but only applies for a specific timeframe.
Minimum monthly payment
The minimum monthly payment is the smallest amount you can pay on your credit card by your due date without going past due.
Penalty APR
If you violate certain usage restrictions, credit card companies may charge a penalty APR, which is usually higher than the regular APR.
Pre-screened offers
Pre-screened offers target consumers based on their borrowing history and other factors. They usually use phrases like “pre-approved” or “pre-selected.”
Pre-qualified, pre-selected, pre-approved
Terms like pre-qualified, pre-selected, or pre-approved signify that a financial institution considers you a likely candidate to meet their credit-offering eligibility criteria.
Prime rate
The prime rate is a base interest rate most major US banks use to calculate variable credit card rates. Changes in the prime rate can affect your variable APR.
Understanding various credit card fees
Annual fee
An annual fee is charged once a year. Not all cards carry this fee, but those that do often offer rewards and benefits that can help offset the cost.
Balance transfer fee
Balance transfers can be enticing, but they often come with balance transfer fees.
Foreign or international exchange fees
These are fees (usually between 1–3% of the purchase amount) on purchases you make outside the US.
This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.