Annual Fee — A yearly charge you may pay for the privilege of using credit. It is typically charged by credit-card companies. They may waive the fee the first year to lure you in, but let’s face it, you’re better off looking for a card with no annual fee.
Annual Percentage Rate (APR) — The cost of borrowing money, per year, calculated as a percentage of how much money you’ve borrowed.
Balance Transfers — Moving a balance or partial balance from one card to another. Balance transfers can be beneficial when transferring a balance to a lower-rate card, but be aware of any additional fees charged for the transfer.
Bounced Check Fees — If the check you write to make your credit-card payment bounces, your card issuer will likely charge you a flat fee. This could end up being especially expensive because the financial institution from which you wrote the check will also charge you a bounced-check fee. Double whammy.
Cash Advance Fee — A fee charged for using the credit card to get cash. This fee can be a flat per-transaction fee or a percentage of the amount of the cash advance. Most cash advances carry a higher interest rate than regular purchases.
Convenience Checks — These are pre-printed checks linked to your credit card. As the name implies, they are convenient for making mail-in payments, but many financial institutions charge an up-front fee for their use, make you pay a higher APR and eliminate your grace period when you use these checks.
Credit — Borrowed money that you can use to purchase things you need, when you need them, and then repay the funds back at an agreed upon time.
Credit Limit — The maximum amount of credit a lender will give you.
Credit Report — A detailed record of all your credit transactions.
Credit Score — A number that indicates your creditworthiness.
Debt — The entire amount of money that you owe to lenders.
Finance Charge — The actual dollar amount charged to you for using credit and keeping a balance. It is typically associated with credit cards.
Fixed Rate — A fixed Annual Percentage Rate (APR) usually does not change, but if it does, you must be notified in writing 45 days prior to the change.
Grace Period — The amount of time you have to pay back funds borrowed, before you start to accumulate interest.
Interest — The amount you pay to use someone else’s money. Interest rates are expressed as an Annual Percentage Rate (APR). The higher the APR, the more money you’ll pay in interest charges every month. APRs can be variable or fixed.
Late Fees — If you make a payment after the due date stated on your monthly credit-card statement, you will be charged a fee. Even if you mail your payment prior to the due date, if it is not processed by the financial institution before that date, you will be charged.
Over-the-Limit Fees — When you apply for a credit card, you will be given a credit limit (the maximum amount of money you are allowed to charge) based on your creditworthiness. This is why building credit is so important. For every purchase you make that exceeds the limit, you will have to pay a flat fee. If you continue to make purchases after you have reached your credit limit, your card could be suspended until the balance is sufficiently lowered.
Principal — The amount of money borrowed in exchange for your promise to pay it back.
Teaser Rates — Don’t be fooled! These are low- or zero-interest rates that are usually offered for a limited time. Before accepting a teaser rate, it is important that you understand when your interest rate will increase and what the new rate will be.
Variable Rate — A variable Annual Percentage Rate (APR) is based on a published index, such as the Prime Interest Rate, plus percentage points added by the credit-card issuer. The rate fluctuates and can change without notice.
