25 Credit Card Terms You Should Know

Whether you’re new to credit cards or an experienced cardholder, understanding these key terms can help you make smarter decisions and avoid costly mistakes. The better you know these basics, the more confident you’ll feel managing your credit.

Annual fee

A yearly charge for having a credit card account. Not all cards have annual fees, so you can look for cards that offer the features you want without fees.

APR (Annual Percentage Rate)

The yearly interest rate charged on borrowed money, including certain fees. APR lets you compare the true cost of credit between different lenders and cards.

Balance

The total amount you owe on your credit card.

Billing cycle

The period, typically about 30 days, between credit card statements. Your statement shows all purchases, payments and fees during that time, plus your total balance and due date.

Cash advance

Withdrawing cash from your credit card at an ATM or bank. Cash advances usually have higher interest rates and fees, and interest starts accruing immediately.

Cash advance fee

A separate fee charged for cash advances, often either a flat amount or a percentage of what you withdraw.

Credit bureau

Companies that collect and report your credit history to lenders. The three major bureaus are Experian, Equifax and TransUnion.

Credit limit

The maximum amount you can charge to your credit card.

Credit utilization

How much of your available credit you’re using, shown as a percentage. Keeping it below 30 percent helps maintain a healthy credit score.

Foreign transaction fee

A fee, usually a small percentage of the purchase, for using your card outside the United States. Some cards waive this fee, which can be a great benefit for travelers.

Grace period

The time, usually 21 to 25 days, between the end of a billing cycle and your payment due date. If you pay your balance in full during this period, you won’t owe interest on new purchases.

Introductory Rate

A temporary, lower interest rate offered to new cardholders for a set period — often several months to a year. After that, the rate changes to whatever the standard rate is (usually significantly higher).

Minimum payment

The smallest amount you must pay by the due date to keep your account in good standing. Paying only the minimum increases interest costs over time.

Over-limit fee

A fee charged if your balance goes over your credit limit.

Penalty APR

A higher interest rate applied if you miss payments, exceed your limit or have a returned payment.

Preapproval

An offer based on a preliminary credit check suggesting you’re likely to qualify for a card. It’s not a guarantee of approval.

Prime rate

The interest rate banks charge their most creditworthy customers. Many credit card APRs are tied to this rate and can fluctuate as it changes.

Rewards

Perks you earn for using your credit card, such as cash back, points or miles. Rewards points can often be redeemed for travel, gift cards or statement credits.

Security code

Also called the CVV, this three- or four-digit number on your card adds security for online or phone transactions by confirming you physically have the card.

Statement balance

The total amount you owe at the end of your last billing cycle, including all purchases, fees and payments made during that period.

Variable Rate

An interest rate that can change based on a benchmark rate, such as the U.S. prime rate. Your rate may go up or down over time depending on market conditions.

Need credit help?

We’ve partnered with GreenPath Financial Wellness to provide our members free financial counseling. Maybe you’ve found yourself in a tough spot. The folks at GreenPath will take the time to fully understand your financial situation and help you develop a personalized plan to get back on track. Reach out today to get started.