Credit Card Definitions/Terms
Annual Fee
The annual fee is the amount you pay every year to have a credit card. This fee must be payed whether you use the credit card or not. This fee was first introduced by American Express and was called a membership fee. However, not all credit cards have annual fees and the fees can range anywhere from $0 per year to as much as $100 or more annually.
APR
APR or Annual Percentage Rate is the yearly rate of interest that includes all of the fees and expenses paid for a line of credit with a particular credit card. APRs are sometimes 0% for up-to the first 15 months and can then range from about 3% to 20% or more depending on your credit history and score.
Balance Transfer
A balance transfer is a special offering from credit card companies which enables you to transfer a current credit card balance to another card. Often with a lower interest rate, which can save you hundreds a year in interest. That extra money can then be put towards making extra payments to pay down the debt quicker.
Cash Advance
Many credit cards offer an option to turn part of a credit limit into cash to pay other bills. There is more than one way to get access to the cash. Many credit card issuers allow the credit card to be used at an ATM to withdraw the cash or sometimes a cash advance check can be written out and used as if it were a regular check.
Cash Back
Cash back offers are a type of credit card that offers cash back as a reward. The cardholder receives cash back for a percentage equal to the amount charged. For instance, if a card holder spent $10,000 in a year with a 5% cash back card, they could expect to receive $500 back. That can add up to huge savings!
Charge Card
A charge card is often confused with a credit card. While a credit card requires a minimum balance to be paid every month on the amount of credit borrowed, a charge card requires the full balance charged using the card to be paid in full each month regardless of how little or large the charge may be.
Credit Card
A credit card is used like a debit card, but instead of withdrawing money from an account, it borrows money from a set credit line. This line of credit will increase over time as credit history is established and payments are regularly made on time.
Credit History
Your credit history is a record of your past use of credit cards. Your history of paying back your debts is taken into account as well as a other factors. Some of these factors may be based on the amount of credit you have available and how much is currently being used. Loans also affect your credit score, not just credit cards.
