Glossary:

Below are some useful finance terms that you want to be familiar with when applying for credit cards. Have a read through the glossary and learn the terms so you can understand the terms being used on your credit card application:

Additional Card is a card that can be issued to a person other than the primary credit card holder. Additional cards may be issued for your spouse, children, or anybody else you want to use your existing line of credit. An additional cardholder is not responsible for any charges made on the credit card even though his or her name appears on the credit card. This responsibility remains with the primary cardholder and a cosigner, if any. However, in case of a joint account all cardholders are responsible for all charges. To obtain an additional card contact the issuer of your credit card.

Annual fee is a ‘membership' fee that is applied to the credit card holder's account by some credit card issuers once a year for maintaining the credit card account and for offering certain special benefits. Annual fees range from zero dollars to several hundred dollars, depending on the credit card. This fee must be disclosed by the credit card issuer before a card can be issued.

Annual Percentage Rate (APR) is an interest rate expressed as an annual percentage rate. The APR is used to calculate the amount of interest on outstanding credit card balances. A low APR means low interest (finance) charges. For example, if a card's APR is 0%, there is no interest charged on the outstanding balance - you pay no interest to the credit card issuer on the borrowed money, you are borrowing money interest-free. On the other hand, if a card's APR is 18%, you pay 18% interest on the outstanding credit card balance. This means that if you owe $1,000 you pay $180 in interest charges per year.

APR - see "Annual Percentage Rate" and "Introductory APR" for additional details

Available Credit is the unused amount of your total authorized credit line. For example, if your total authorized credit line is $3,000, and your current outstanding balance is $400, your available credit is $2,600.

Balance : see Outstanding Balance

Balance Transfer is a transfer of a balance 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.

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 slightly higher on cash advances than it is on purchases. In addition, there is usually no Grace Period for cash advances and transaction fees are often charged.

Cosigner : may be a family member or a friend who is willing to act as a guarantor of the potential credit card debt that may be accumulated by the credit card holder. It is not required to have a cosigner on your credit card application, but in many cases it may increase your chances of obtaining a credit card. For example, for teen-agers who have not yet had an opportunity to establish their own credit histories, having their parents to be cosigners on the credit card application will, in most cases, increase the chances of obtaining a credit card. Before you ask anybody for the favor of cosigning your application, make sure that the cosigner reads and understands the responsibility, and potential liability associated with being a cosigner.

Credit Card : Credit cards provide convenience of purchasing goods and services and paying for them later. The outstanding balance on the credit card account can be paid either in full after receiving a monthly statement, or by making payments over time. Finance (interest) charges apply to any unpaid balance. A credit card account is a form of a loan, and therefore, all charges made on the credit card must be eventually paid by the credit card holder. Since credit cards offer a variety of benefits, and several types of finance charges may be imposed under certain conditions, it is wise to compare credit cards before you apply. The comparison tables on our website will help you choose a card that is suitable to your needs.

Credit Card Issuer is an organization that is issuing credit cards and provides credit lines to individuals or organizations. In most cases, these issuers are financial institutions such as banks or credit unions. Department stores, gasoline companies, and other organizations also issue credit cards.

Credit Limit (Credit Line) is the largest amount of outstanding balance that you are authorized, by the credit card issuer, to carry on your credit card. For example, if your credit limit is $5,000, you are allowed to use the $5,000 as a revolving line of credit by using your credit card for purchases and withdrawals; the maximum amount of money you could borrow on your credit card would be, in this case, $5,000. You can request an increase of your credit limit by contacting your credit card issuer. The issuer then may increase your credit limit after reviewing your credit history. ‘Over the limit' fee may be charged if you exceed your credit limit. See Maximum Credit Limit or Minimum Credit Limit for additional details.

Due Date : a credit card issuer should receive your payment on or before the due date that is stated on your monthly statement. Make sure to make your monthly payment several business days before the due date so that your payment arrives on time. The due date is the date by which the credit card issuer should receive the payment, not the date by which you should pay your credit card bill.

Finance Charges (Fees) are all interest charges, any transaction fees, and any other fees combined. The sum of all finance charges is your cost of borrowing money from the credit card issuer. Your monthly account statement, Customer Agreement, and/or Disclosure Statement describe how finance (interest) charges are calculated by your credit card issuer.

Grace Period (Free Period) is a period of time when you are not charged any interest for new purchases made with your credit card. For example, if your purchase is posted (recorded by the credit card issuer) on June 1 and the Grace Period on your credit card is 22 days, the interest charges do not start accumulating for that purchase until the end of the Grace Period, which means until June 23. In this way, you can use your credit card interest-free if you always pay your balance in full by the required date. However, if your required payment does not reach the credit card issuer by the due date, the Grace Period may be waived and you may be charged interest starting the date your purchase was posted, that is in this example June 1 not June 23. If your credit card has no Grace Period, the credit card issuer may apply interest on your purchases starting the day you made the purchase. See your cardholder agreement for details about the Grace Period as specified by your card issuer.

Interest Charges (also called Finance Charges) is the amount of money that you pay to the credit card issuer for borrowing their money. It is calculated by using an Annual Percentage Rate (APR). See your cardholder agreement for specific details on how the interest charges are calculated on your credit card.

Interest Rate : see Annual Percentage Rate (APR) for more information

Introductory APR (Introductory rate) is an interest rate that is used for a specified period of time to calculate interest payments. This period is usually first six months after the credit card was issued. Introductory APR serves as an incentive for transferring balances from existing credit cards onto the new, low or no interest credit card to take advantage of a much lower or 0% interest rate to save money on interest charges. See "Annual Percentage Rate"

Issuer : see Credit Card Issuer for more information

Late Charges (Late Fees) : in order to avoid any late charges, make sure that at least the minimum due amount, as stated on your monthly statement, reaches the credit card issuer by the due date. The due date is the date by which your payment should be received by the credit card issuer, 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 effects on your credit history, even if your entire outstanding balance is later paid in full. Credit card issuers and other lenders request your credit reports from credit bureaus to check your credit history. Too many late payments recorded on your credit report could make it harder for you to qualify for any kind of loan or credit card in the future.

Maximum Credit Limit (Credit Line) is the maximum amount of credit limit that a credit card issuer is willing to authorize for a particular credit card. This amount is stated in credit card solicitations and/or in credit card applications. It is very important to note that you need a very good credit history to be approved for the maximum credit limit. In most cases, your actual authorized credit limit will be lower than the maximum credit limit stated by the credit card issuer on any promotional material.

Minimum Credit Limit (Credit Line) is the minimum amount that you will have available on your credit card if you are approved. This amount may be stated in credit card solicitations and/or in credit card applications. The actual credit limit that you will have available on your credit card will be determined by the credit card issuer. In most cases, your actual authorized credit limit will be higher than the minimum credit limit stated by the credit card issuer on any promotional material.

Minimum Monthly Payment is the smallest monthly payment that is required to be received by the credit card issuer by the due date. The minimum payment is stated on your monthly statement, and usually is around 3% to 5% of your total outstanding balance, or it is some other minimum fixed amount.

Outstanding Balance is the amount of money that you owe to the credit card issuer. The outstanding balance constantly changes as your purchases, cash advances, interest charges, and any other charges are added to the previous balance, and your payments are deducted from the previous balance. For example, if your balance is $800, and you make a payment of $600, your new outstanding balance is $200.

Over The Limit Fee : if exceeding your credit limit is permitted by the credit card issuer, the issuer may charge you a fee for having an account balance higher than the approved credit limit. This fee varies among credit card issuers, but usually is around $20. Exceeding your credit limit is not recommended because it may be recorded in your credit history.

Prime Rate is the interest rate that banks charge to their best customers. Most individuals and institutions cannot borrow at the prime rate because the prime rate is reserved only to those with the highest credit rating. These are usually well established institutions that are expected not to default on a loan. Credit card issuers and other lenders often use the prime rate as a base rate to determine the Annual Percentage Rate (APR) - for example ‘prime + 10%‘. Since the prime rate fluctuates from time to time, loans tied directly to the prime rate (e.g. ‘prime + 10%‘) are called ‘variable rate' loans. The APR on the variable rate loans therefore fluctuates in the same way as the prime rate fluctuates.

Purchases : the interest rate applied on purchases that were charged to your credit card is usually slightly lower than on cash advances. No transaction fees are usually imposed when a credit card is used for purchases.

Secured Credit Card can help you establish or re-establish your credit history. A security deposit is required before a credit card issuer will issue you a secured credit card. A secured credit card is well suited for people who have never had any credit card or any other loan, or for people who want to re-establish and improve their credit rating.

Transaction and Other Fees (Charges) are fees that are charged by credit card issuers for cash advances from Automated Teller Machines (ATM) or a bank, cash advance checks, returned cash advance checks, late payments, overdrawing on your credit limit, or in some cases monthly fees charged by some issuers. Many of these fees can be avoided if the credit card agreement is followed. Transaction fees for cash withdrawals at another bank's ATM usually range from $0.50 to $3. See your Cardholder Agreement and/or Disclosure Statement for specific details on all types of fees.

Unsecured Credit Card does not require any cash deposit or any other collateral before the credit card is issued. The unsecured credit card is backed only by your credit history and your financial resources available. If your credit card application is approved, an unsecured line of credit is available for your use. The limit of such credit line is determined by the credit card issuer.