18 important credit card terms to know

18 Important Credit Card Terms to Know

By Michael Peterson
In January 10, 2020

It’s easy to feel overwhelmed by credit card terminology. What’s the difference between your credit report and your credit score? What does APR stand for? What exactly is a CVV, anyway? In this blog, we’ll look at 18 important terms that every credit card holder should know:

  1. Annual fee. The yearly “membership” fee attached to some credit cards (usually reward cards). Not all credit cards charge an annual fee.
  2. Annual percentage rate (APR). The interest rate that a credit card company charges for carrying a balance. People with good or excellent credit scores typically end up with a lower APR (around 10%). Folks with bad credit usually end up with much higher rates (think 15% and up).
  3. Authorized user. A person who is approved to make purchases on someone else’s credit card account. An authorized user may have a credit card with his or her name on it, but they are not the account holder.
  4. Balance transfer. Moving some (or all) of your credit card debt to a different credit card. These transfers usually offer a super-low or even 0% introductory interest rate that can last anywhere from 6 to 18 months. A balance transfer can be helpful if you’re trying to pay down a card with a high balance in a short amount of time.
  5. Cash advance. A quick, short-term loan borrowed from your credit card account. Cash advances typically come with very high interest rates, and they can also hurt your credit score and negatively affect your credit utilization ratio.
  6. Credit limit. The total amount of credit available to you on a particular credit card. It’s also referred to as your credit line.
  7. Credit report. A report that typically contains information about your credit accounts and loans, plus information about your payment history, late payments, and recent “hard” inquiries (such as applying for a loan or opening a new credit card account). 
  8. Credit score. A three-digit number that represents your creditworthiness. Your credit score is used by banks and potential lenders to determine your eligibility and interest rates for credit cards, mortgage and auto loans, and more. 
  9. Credit utilization ratio. The relationship between how much of your total available credit is currently in use. Your credit utilization ratio is one factor that determines your credit score. In general, the less credit in use, the higher your credit score will be. 
  10. Card verification value (CVV). Also known as a “security code” for your credit card. Your CVV is a set of three or four numbers that appear on the back of your card (it can also be on the front). This code, which is separate from your account number, provides an extra layer of protection from would-be scammers.
  11. Dispute. A formal process for questioning a credit card charge that you feel is incorrect or fraudulent. 
  12. Due date. The date your minimum payment must be submitted to your credit card lender. Payments made after the due date are usually considered late (and you may be charged a late fee).
  13. Finance charge. The interest you are charged for carrying a balance on your credit card. 
  14. Grace period. A window of time during which you can pay off your credit card balance without being charged interest. Most credit cards have a grace period, but the amount of time can vary from lender to lender.
  15. Introductory offer. Incentives that encourage customers to open new credit cards. Examples of introductory offers that credit card companies offer include 0% interest, no fees, or extra reward points on new purchases. Introductory offers usually last for a set period of time, such as 6 months or one year.
  16. Late payment fee. A fee that’s charged for missing the payment due date on your credit card bill. Late fees can vary by lender. Some credit card companies charge a flat fee, regardless of how much you owe. Others charge a tiered fee that corresponds to your total outstanding balance.
  17. Minimum payment. The minimum amount you must pay toward your balance every month. Your minimum payment is determined by the amount of your outstanding balance, plus any applicable fees or finance charges.
  18. Secured credit card. A card that works almost exactly like a traditional credit card, with one major difference: Unlike traditional credit cards, secured cards require a cash deposit as collateral. Secured credit cards are easier to get than regular cards, and they can be helpful if you’re trying to establish a credit history or repair a very bad credit score.  
use a secured credit card

Looking for advice about how to pay down high-interest credit card debt? Need help with budgeting or money management? Call the friendly folks at DebtGuru.com today. We’re here to help!

Michael Peterson

Mike is the author of “Reality Millionaire: Proven Tips to Retire Rich” and he has been published in a variety of local and national publications including Entrepreneur Magazine, Deseret Morning News, LDS Living Magazine, and Physicians Money Digest. He holds a B.S. in business administration from the University of Phoenix.