Learn the Lingo

Annual Percentage Rate (APR): the cost of credit as indicated by a yearly interest rate. This rate and the periodic rate (see below) must be disclosed to you before you become obligated on the card.

Balance Computation Method: the formula used to determine the outstanding balance on which you're charged interest for the billing period.

Balance Transfer: The process of moving an unpaid credit card debt from one issuer to another. Card issuers sometimes offer teaser rates to encourage balance transfers coming in and balance-transfer fees to discourage them from going out.

Finance Charge: the charge for using a credit card comprised of interest costs and other fees; determined by multiplying the outstanding balance by the periodic rate.

Fees: charges (other than the finance charge) that may be levied against your account. Common examples include an annual fee; cash advance fees, balance transfer fees, late payment fees, and over-the-limit fees.

Grace Period: the interest-free time a lender allows between the transaction date and the billing date for users who do not have an account balance. If there is no grace period, finance charges will accrue the moment a purchase is made with the credit card. People who carry a balance on their credit cards have no grace period.

Periodic Rate: the interest rate described in relation to a specific amount of time. The monthly periodic rate, for example, is the cost of credit per month; the daily periodic rate is the cost of credit per day.

Variable Interest Rate: percentage that a borrower pays for the use of money, which moves up or down periodically based on changes in other interest rates.



Page last modified February 27, 2013