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Glossary of Credit Card Terms

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Annual Fee

Annual Fees for credit cards are a fee that the credit card charges you simply to have access to usage of the card.  Many of the cards that provide extensive services or benefits have higher annual fees - for example the American Express Platinum Rewards Card which has a $450 annual fee just for using the card.

APR

APR stands for annual percentage rate, and it is the interest rate charged on credit card balances expressed in a standardized, annualized way. The APR is applied each month that an outstanding balance is present on a credit card

Balance Transfer

A balance transfer occurs when the outstanding balance of one credit card (or several credit cards) is moved to another credit card account. This is often done by consumers looking for a lower interest rate. Many credit card issuers offer introductory balance transfer APRs that are lower than the standard rates. Balance transfers usually have fees.

Balance Transfer Fee

A Balance Transfer fee is the fee a credit card company will charge you in order to transfer an existing balance from one card to another.  For instance, if you currently have $6,000 in credit card debt, but are paying a 22% APR, many credit cards offer you the opportunity to transfer your balance from one card to another, allowing to to take advantage of an introductory APR period.  Find some math below to illustrate :

If you have a $6,000 balance you can't pay off right now, and have a 15% APR rate with your current credit card, you're stuck making monthly payments of $900 to your credit card company - just for carrying the balance!

But if you transfer the balance to a credit card that has no introductory APR and Low Balance Transfer fee, for instance the Simplicity Credit Card from Citi, you will pay the balance transfer fee 3%, or $180, and then have no monthly interest payments for 18 months!  This saves you over $16,000.

Balance Transfer Introductory Rate

The Balance Transfer Introductory is the rate you are charged to transfer balances from existing credit cards.  This ranges from 0% with the Chase Slate credit card  to 3% or $5 whichever is greater with the Citi Simplicity Credit Card .

Balance Transfer Intro Period

The Balance Transfer intro period is the period for which you don't need to pay a fee on your existing balances.  This is useful if you need to use the card for a big purchase and need to pay off the balance over an extended period of time.  A good example of an extended Balance Transfer Introductory Period would be the Citi Simplicity Card , which offers you 4 months to transfer your balances.

Balance Transfer Minimum

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Balance Transfer Rate

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Card Issuer

Any financial institution, bank, credit union or company that issues (or causes to be issued) plastic cards to cardholders.


Cash Advance Fee

Many credit cards offer you the ability to take a cash advance (or withdraw cash) based on your existing credit.  In this case, they offer similar services to a bank loan - wherein you will be able to withdraw cash on credit with the expectation of paying it back soon.  Cash Advances often have notoriously high interest rates, and there isn't currently one on the market that won't be expensive.

Cash Advance Minimum

Cash Advance Minimum generally refers to the minimum fee they will exact on your cash advances.  For example, many cards have a 3% fee or a minimum of $6 - in that situation, if you were to take out a $100 cash advance, 3% of that would only be $3.  This means they would take the "Cash Advance Minimum" of $6.  

Cash Advance Rate

The Cash Advance Rate is the rate the credit card companies will charge on a cash withdrawal.  This rate is generally higher than the interest rate for the card, so credit card companies are notorious for making large margins here.

Credit Needed

Credit Needed refers to the credit score that you need in order to attain the credit card.  From Wikipedia, "A credit score is a numerical expression based on a statistical analysis of a person's credit files, to represent the creditworthiness of that person. A credit score is primarily based on credit report information typically sourced from credit bureaus." 

Essentially, your credit score is a number that looks at your past history of credit card usage and loans to determine the likelihood that you will pay back a given debt.  Credit Cards with higher limits will want you to have a higher credit score because the credit card company is exposing itself to more risk (you can spend more money on the card).  Credit Cards that require lower credit scores (lower "credit needed") will generally have lower limits, or other ways for the credit card company to defend themselves in case of default.

Credit Score

From Wikipedia, "A credit score is a numerical expression based on a statistical analysis of a person's credit files, to represent the creditworthiness of that person. A credit score is primarily based on credit report information typically sourced from credit bureaus." 

Essentially, your credit score is a number that looks at your past history of credit card usage and loans to determine the likelihood that you will pay back a given debt.  Credit Cards with higher limits will want you to have a higher credit score because the credit card company is exposing itself to more risk (you can spend more money on the card).  Credit Cards that require lower credit scores (lower "credit needed") will generally have lower limits, or other ways for the credit card company to defend themselves in case of default.

Credit Union

A credit union is one of many types of financial institutions that can offer credit cards to consumers. Credit unions are organized as cooperatives, and are open to individuals with a common affiliation. That affiliation can be based on employment, geography or interest.


FICO Score

A FICO score is a particular type of credit score -- one offered by FICO, the company that pioneered their use. Like other credit scores, a FICO score is a three- digit numeric value that assesses a borrower's credit risk. Your FICO score can range from 300 to 850. The higher the number, the more likely the loan is to be repaid. People with low FICO scores get charged higher interest rates to make up for the added risk. People with high FICO scores get the best deals. FICO scores are calculated using complex formulas that predict future debt repayment behavior. Income, credit lines outstanding, debt to income ratio, mix of credit and past payment behavior all factor into a person's FICO score.

Interest Rate

Simply put, an interest rate is the price a lender charges for loaning money. On credit cards, interest rates are a little trickier, because lenders set multiple interest rates. For example, you may have a low, teaser (introductory) rate when you open an account, followed by a higher standard rate for purchases, which turns into a penalty rate if you pay late. So you may end up owing a balance to a credit card company with multiple interest rates. Interest rates on credit cards are expressed in a standardized way so consumers can more easily compare cards. That standard way is known as the APR, which stands for annual percentage rate.

Late Fee

The Credit Card late fee generally refers to the fee on a late payment to your credit provider.  If you are carrying a balance there will be a series of minimum payments due - if you do not pay these minimum payments, you will be charged a late fee.

An important thing to consider is that these minimum payments do not mean you are not paying interest on the rest of the balance - they are simply the minimum amount you need to pay in order for the credit card company to not report you to the credit bureaus.  Find more information about minimum payments here.

MasterCard

MasterCard is a global bank card payment transaction processor, whose portfolio of brands and products include Maestro, Cirrus and MasterCard PayPass. It partners with financial institutions that issue credit cards, and with merchants who accept those cards. MasterCard offers a network of more than 28 million acceptance locations around the world and, in many cases, guarantees payment through its system. Through its merchant agreements, it sets payment and charge-back policies that affect consumers. It does not, however, issue cards, set annual fees, determine annual percentage rates on cards or solicit merchants to accept cards.

Overdraft Protection

Overdraft protection is a service that automatically transfers funds from one bank account to another in order to avoid overdraft fees when insufficient funds are available. It can apply to savings accounts, checking accounts, lines of credit or credit cards. Overdraft protection carries its own fees, however. Previously, the service had frequently been automatically applied when an account was opened and the customer had to opt out. However, rules issued by the Federal Reserve in 2010 changed that, forcing banks to get your permission before you are enrolled.

Purchase Introductory APR Period

The Purchase Introductory APR refers to the interest fee period at the beginning of using a credit card.  Many cards, like the Citi Simplicity Credit Card  or the Chase Slate Credit Card offer an extended period where you do not need to pay interest on the balance on your credit card.  These cards can be great if you are going to make a big purchase that you plan on paying off over an extended period of time.

Purchase Introductory APR Rate

The Purchase Introductory APR Rate refers to the interest rate you will pay in the Introductory APR Period.

Schumer Box

The Schumer Box is named for the then-chairman of the Senate Banking Committee that passed landmark consumer protection legislation, Sen. Charles Schumer. This standardized disclosure "box" features relatively consistent terms and conditions for credit card offers, which allows consumers to compare cards in a consistent way. Specific terms and conditions such as purchase and cash advance interest rates, annual fees and rate calculation methods are required to be spelled out for consumers in conjunction with all new account solicitations.

Score

Score refers to Credit Authority's score for a given card.  For every card on our site we assess a number of things - including APR rates, benefits and point systems, customer service, and just overall card value.  Our score is the result of our sophisticated algorithm, in addition to our personal experience - giving you an accurate and valid idea of which credit cards are the best and the best for you!

Secured Credit Cards

Secured credit cards require collateral -- usually a cash deposit with the issuing institution -- for approval. They are designed for people with no credit or poor credit. Some secured card marketers load these cards with high fees and unfavorable terms, taking advantage of the financial situations of potential applicants.  

Teaser Rate

Also called the introductory rate, the teaser rate is the annual percentage rate charged by the credit card issuer during an initial period. The Credit CARD Act of 2009 requires that introductory periods must last at least six months. When the teaser period ends, the APR goes to a higher, "go-to" rate.

Unsecured Credit Cards

Unsecured credit cards are the most common type of credit cards. They are not secured by collateral. That means that unlike secured loans, such as mortgages or auto loans, unsecured credit cards are not directly connected to property that a lender can seize of the cardholder fails to pay. Issuers of unsecured cards must make use of other means -- such as the courts or garnishment -- to collect unpaid debts. Customers qualify for unsecured cards based on their credit history, their financial strength and their earnings potential.

Visa

Visa U.S.A. is one of the nation's leading processors of credit and debit transactions via its payments network. VISA links more than 13,300 financial institutions, 6.9 million merchant acceptance locations and 520 million cards.