Financial Literacy 2007 - Credit cards
credit cards
17 most-common credit card terms

6. Credit limit -- The maximum amount the card allows you to borrow.

7. Finance charge -- The charge for using a credit card, comprised of interest costs and other fees.

Read the fine print. You may have different finance charges for cash advances and balance transfers. You may also discover that if you pay off your balance each month, you will escape the finance charge.

Most credit card issuers use the single-cycle average daily balance method to calculate finance charges. Some, however, may use the double-billing cycle.

8. Grace period -- If the credit card user does not carry a balance, the grace period is the interest-free time a lender allows between the transaction date and the billing date. The standard grace period is usually between 20 and 30 days. If no grace period exists, 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.

9. Late fee -- The charge tacked on to tardy payments. Late penalties average from $30 to $35 per month.

10. Minimum payment -- The minimum amount a cardholder must pay to keep the account from defaulting. Usually this amount comes to 2 percent of the outstanding balance.

To pay down your debt, you'll want to pay as much of the balance as you can, if not all of it.

11. Over-the-limit fee -- The charge for exceeding the credit limit on the card. It generally costs around $30 to $35.

12. Payment due date -- This does not mean the postmarked-by date, but the date by which the issuer must receive your payment. Allow a mailed payment seven to 10 business days to get there. If you pay online, find out how long payments take to process. Likely, it's not an instantaneous debit.

13. Periodic rate -- The interest rate relating to a specific amount of time. It's used to calculate the finance charge for each billing period. The monthly periodic rate, for example, is the cost of credit per month; the daily periodic rate is the cost of credit per day.

14. Previous balance -- The outstanding balance at the end of your last billing cycle. This amount excludes payments made toward the balance.

15. Purchases/new charges -- The total amount of new debts incurred during the current billing cycle. Different interest rates may apply to balance transfers and cash advances, so make sure the amounts are correct.

16. Two-cycle billing -- A billing method that calculates the average daily balance using two billing cycles rather than one. Finance charges are typically higher. This method eliminates the grace period for customers who carry a balance. If the bill is not paid in full at the first billing, interest becomes retroactive back to the purchase date. For more information about two-cycle billing read the Bankrate feature, " How 2-cycle billing works."

17. Variable interest rate -- Percentage that a borrower pays for the use of money, and which fluctuates periodically based on changes in an interest rate index.

Make sure to read the fine print for mentions of other miscellaneous fees. For a complete list of credit card terms, check out our glossary. Here are 13 terms common to credit card contracts.

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Balance Transfer Cards 15.67% --0.00 15.67%
Cash Back Cards 16.36%  0.01 16.35%
Low Interest Cards 10.87% --0.00 10.87%
 
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