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Balance Transfer Fee: A once-only fee
charged by the credit card company to transfer a balance from
another card account to that particular credit card
account. This charge can be anything from 1% to 5% of the
transferred balance (often up to a certain maximum dollar value).
For example, a typical balance transfer fee could be 2 or 3% of the
transferred balance up to a maximum charge of $50. Not all credit
cards will charge this fee.
Billing Cycle: The time between each billing
statement, typically 28-31 days.
Cash Advance: A
cash advance is a cash loan obtained from your credit card account,
usually through a bank or an ATM. This type of transaction can
often be much more costly than typical purchases, as the interest
rate is usually higher and there may be other fees
applicable.
Credit Limit: This is the total
amount of money that may be charged to or held as a balance (or a
combination thereof) on a particular credit card
account.
Credit Report: A report of an individual's
credit history that is usually used to determine the individual's
creditworthiness.
Debt Consolidation: The act of
replacing (consolidating) several different loans (debts) with just
one.
Finance Charge: This is a combination of interest
charges and other transaction fees (i.e. balance transfer fees, cash
advance fees, late fees, overlimit fees) that occur during the
use of a credit card.
Fixed Rate (or Fixed APR): A
fixed APR does not change but rather stays the same for a specified
period of time. This differs from a credit card with an "intro APR."
in that an intro APR is a temporary low APR that moves to a
higher rate after the introductory period has expired
(typically 3-12 months).
Grace Period: This is the
time allowed to pay your credit card bill without being billed a
finance charge and/or late fee. It is usually 10-28
days.
Introductory Rate (or Intro APR): A temporary,
lower annual percentage rate that will typically last from 3 to 12
months. After the introductory period has expired, the APR generally
rises.
Minimum Payment: The minimum payment that
a cardholder is required to pay the credit card issuer each month.
This amount is generally based on the outstanding balance on
the cardholder's account. A cardholder can always
choose to pay more than the minimum payment, and paying the entire
balance in full is advised in order to avoid finance
charges.
Overlimit Fee: A fee charged when the
cardholder's balance exceeds his/her credit
limit.
Prime Rate (or Prime Interest Rate): The
interest rate at which banks lend to their most creditworthy
customers. The prime rate can change although not on a
regular basis.
Secured Credit Cards: These are credit
cards that require collateral for approval. With secured credit
cards, a security deposit is needed to secure the balance on the
credit card. The amount of the security deposit usually equals the
credit limit for that particular credit card. Generally, secured
credit cards are for individuals with no credit or poor credit
who are trying to build or rebuild their credit
history.
Unsecured Credit Cards: These are credit
cards that are not secured by any collateral. Customers will qualify
based on their credit history, financial strength and earnings
potential.
Variable Rate: Variable Rate is the
opposite of a fixed rate. It is generally Prime Rate + an additional
rate. As an example, if the rate of a credit card is
"Prime rate + 4%," and the current prime rate is 10%, the APR would
be 14%. The prime rate will vary throughout the
year.
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