Common terms & definitions

/ Annual Percentage Rate (APR)
This is the amount your card issuer will charge in interest against your account balance remaining. Normally calculated everyday or once a month, the APR is charged to your account every monthly billing cycle.

/ Balance Transfer
This is a common form of debt consolidation that involves transferring the balance of your previous account to new one with a lower APR, or an account that offers an zero interest balance transfer promotion for a limited period of time.

/ Cash Advance
An alternative to charging purchases directly to your credit card, you may opt to avail of a cash advance that lets you withdraw money from an Automated Teller Machine and pay with currency instead. The interest rate for cash advances is usually higher than the interest on your regular credit card transactions, and may also be charged a transaction fee.

/ Credit Limit
This is the maximum amount you can charge to your card. This is based on your credit history but you may be able to negotiate for a higher limit with your card’s issuing company.

/ Grace Period
This refers to the period of time before a transaction starts to accrue interest charges. For instance, if you have a grace period of thirty days, any purchase you make on your card does not appear on your statement until a month after the transaction. Grace periods usually do not exempt from interest cash advances and balance transfers.

/ Penalty APR
Card holders that exceed their credit limit or habitually make late payments are usually charged a Penalty APR which is a much higher interest rate than what normally is charged to your card.

/ Personal Identification Number (PIN)
This is a combination of numbers that protect your account from unauthorized cash advances in case you lose your card or it is stolen. Some retailers also ask for your PIN at point of sale for verification purposes.

/ Pre-Approved
This is actually a marketing phrase to attract customers who are informed that they are “pre-approved” to go ahead and supposedly “proceed” with the application process. In reality a credit card company cannot approve you for credit if you haven’t applied for it in the first place.

/ Security Number
This is the combination of numbers printed before the end of the signature strip on the back of a credit card. These digits do not appear on credit card imprints to prevent fraud by individuals that attempt to “clone” your card. When shopping online you may be asked to give your security number for verification purposes.

/ Transaction Fee
This is either a fixed amount or a percentage of a transaction that is charged against your account. Transaction fees generally apple to cash advances and purchases that exceed your credit limit.