Credit Card Professor

Average daily balance: The sum of the daily outstanding balances is divided by the number of days covered in the cycle to give an average balance for that period. This amount is multiplied by a constant factor to give an interest charge. The resultant interest is the same as if interest was charged at the close of each day, except that it only adds to the principal once per month.

Annual Percentage Rate: The interest rate for a whole year.

Balance Transfer: The process of moving unpaid credit card debt from one issuer to another.

Cash-advance fee: A fee charged by banks for when you use a credit card to obtain cash.

Cardholder agreement: The contract you sign that offers the terms and conditions of the credit card account.

Finance charge: The charge for using a credit card

Floor: The minimum rate on a loan, line of credit, or other initial introductory rate periods.

Grace period: The interest free time a user has to pay their credit card bill. It’s the time a lender allows between the transaction date and the billing date.

Minimum payment: The smallest amount of money a cardholder can pay in order to keep their account active.

Over-the-limit fee: The fee charged when you exceed your credit card limit

Periodic rate: The interest rate described in relation to a specific amount of time.

Pre-approved: The customer has passed the first round of credit-information screening.

Secured card: A credit card that is secured with a savings deposit to ensure payment of an outstanding balance if the cardholder falters on payments.

Teaser rate: Also known as the introductory rate, it is the below-market interest rate offered to customers to entice them to use the credit card.

Variable interest rate: The percentage that a borrower pays for the use of money.

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