Important credit card terms - Credit & Loan Options Important credit card terms - Credit & Loan Options

Important credit card terms

Important credit card terms
Credit card: A physical card that’s tied to a credit account. The card can be used to make purchases through that credit account.

Unsecured credit card: A credit card that doesn’t require any security deposit from the cardholder. Most credit cards are unsecured.

Secured credit card: A credit card that requires a security deposit when the cardholder opens the account.

Cash advance: Using a credit card to get cash. Cash advances typically have higher APRs and start accruing interest immediately, so they’re not recommended.

Balance transfer: Transferring a balance from one credit card to another, most often because one card has a lower APR. Not all credit cards offer this feature.

Credit limit: The maximum balance a credit card can have. Many credit cards have different limits for cash advances. For example, a card could have a credit limit of $10,000, but a cash advance limit of $3,000. That means of the $10,000 credit limit, up to $3,000 could be used for a cash advance.

Available credit: The difference between a card’s credit limit and its available credit. If you have a $400 balance on a card with a $1,000 credit limit, then its current available credit is $600.

Revolving line of credit: A line of credit you can borrow from, up to the limit, as long as the account is open.

APR: The annual percentage rate, which is the annual cost of borrowing money.

Minimum payment: The minimum amount you need to pay on your credit card by the due date. If you don’t pay at least this much, the card issuer can charge you a late fee.

Statement balance: The credit card’s balance on your most recent statement closing date. By paying this amount in full every billing cycle, you can avoid interest charges on purchases you make.

Credit score: A number that rates your creditworthiness, or the likeliness that you’ll repay what you borrow.

Source: the ascent