Understanding Credit Cards

Credit card companies send pre-approved credit card applications in the mail when the individual has passed the initial credit check

How do I obtain a credit card?

Pay your bill in full by the due date

How to avoid paying interest on purchases

Loss of Introductory APR

If the card has an introductory rate, this area will list how the lower introductory rate can be lost

Typically $0.50 - $2 per month

Minimum interest charge

Year-to-date totals

Total amount paid in fees and interest charges for the current year

Late payment warning

What will happen if a payment is late—usually additional fees and a higher interest rate

Credit card

a plastic card that you can use to access a line of credit that has been established in advance

Introductory rate

APR that may be charged (usually increased) after the introductory period ends

Set-up fee

fee for opening the account

Additional card fee

fee to have a second person on the account

Credit limit

maximum dollar amount that can be borrowed.

Variable-rate APR

may change depending on other factors (such as economic conditions)

Cash advance

withdrawing cash from an ATM using a credit card

Annual fee

yearly fee that may be charged for having a credit card

Minimum Payment

A minimum payment is due each month the card had a balance

Schumer box

Credit card issuers are required to disclose the terms and fees of credit cards in an easy to read box format

Minimum payment warning

Estimate of how long it can take to pay off balance if only minimum payment is made

Notice of changes to your interest rate

Notifies card holder if rates are changing (typically a result of the Penalty APR being triggered)

Summary of account activity

Overview of credit card

Interest charge calculation

Summary of the different types of transactions

Annual percentage rate (APR)

The cost of credit expressed as a yearly interest rate

Balance Transfer

act of transferring debt from one credit card to another

Returned payment fee

applies if the cardholder does not have enough money to cover a payment.

Fixed-rate APR

cannot change during the period of time outlined in a credit card agreement

Over-the-limit fee

charged if the account balance goes over the set credit limit

Late-payment fee

charged when a cardholder does not make the minimum monthly payment by the due date

Penalty APR

interest rate charged on new transactions if the penalty terms in the contract are triggered

Participation fee

monthly fee for having the credit card