Agreement
The credit card issuer or bank will send you a cardholder agreement that describes the terms and conditions that apply to your card. The Truth-in-Lending Act of 1988 requires all credit card issuers to disclose upfront their most important contract terms which includes interest rate charged, method of calculating interest, and any transaction fees.

Annual Fee
A flat, yearly fee charged to your account. In today’s competitive credit card landscape, many issuers are not charging annual fees unless you are buying into a rewards program (such as a frequent flyer card), or if the card requires full payment each month (such as some American Express cards). 

Annual Percentage Rate (APR)
A measure of the cost of credit expressed as a yearly interest rate. Many credit card plans charge different APRs for credit used in different ways--for example, one APR for purchases, another for cash advances, and still another for balance transfers. Some plans may increase the APR if a payment is late. There are also introductory APRs that last for a specific time period (usually six to 12 months).

Average Daily Balance
The most common method banks use to calculate your interest.  In calculating your average daily balance, the bank simply adds up your daily balances in any given billing cycle, and divides that number by the number of days in the billing cycle (the billing cycle is the time between your current and pervious bills).

Cash-Advance Fee
A fee charged if you obtain a cash advance, which is simply a cash loan against your credit limit. This fee is in addition to the interest rate charged on the amount of the advance, and is usually higher than your regular APR.

Credit Bureau
A credit bureau keeps a detailed record of your credit history.  Creditors can access this data when considering your application for credit, and they base their approval decision on this information.  If you are denied credit, you are entitled to a free copy of your credit report within 60 days of the denial under the Fair Credit Reporting Act.

Credit Limit
The maximum amount you may charge on your credit card.  The bank issuing the credit card will set your credit limit upon approval of your account.

Delinquency Assessment
A fee that is charged for a late payment.

Finance Charge
The dollar amount you pay to use credit. Besides interest costs, the finance charge may include other charges such as cash-advance fees.

Fixed Interest Rate
An interest rate that remains fixed, or stays the same.

Grace Period
A period of time, often between 20 and 25 days, during which you can pay your credit card bill without incurring a finance charge. Under nearly all credit card plans, the grace period applies only if you pay your balance in full each month. It does not apply if you carry a balance forward. Also, the grace period usually does not apply to cash advances, which may begin accruing interest from the day of the transaction.

Interest Rate
A measure of the cost of credit, expressed as a percent. For variable-rate credit card plans, the interest rate is explicitly tied to another interest rate, usually the Prime Rate or the Treasury Bill Rate. If the Prime of Treasury Bill rates change, the rate on your card will, too. The interest rate on fixed-rate credit card plans, though not explicitly tied to changes in other interest rates, can also change over time. The card issuer must notify you before the "fixed" interest rate is changed. A tiered interest rate means that different rates apply to different levels of the outstanding balance (for example, 16% on balances of $1 - $500; 17% on balances above $500).

Late-Payment Fee
A charge imposed when your payment is late. If your payment arrives after the grace period, you may be charged both a finance charge (the interest on your outstanding balance) and a late-payment charge. Some card issuers may also impose a penalty rate if you have more than one late payment within several months.

Over-The-Limit Fee
A fee imposed when your charges exceed the credit limit set on your card.

Past Due
When you do not pay at least the minimum payment on time, or by the due date as indicated on your monthly statement.

Penalty rate
The rate that applies under specific circumstances set out by the card issuer. For example, if you make 2 late payments within 6 months, a card issuer may have a policy of raising the interest rate.

Periodic rate
The rate you are charged each billing period. For most credit card plans, the periodic rate is a monthly rate, calculated by dividing the APR by 12. For example, a credit card with an 18% APR has a monthly periodic rate of 1.5%.

Posting Date
The date that a purchase or cash advance is recorded on your account.

Prime Rate
The interest rate banks charge for loans to their biggest and highest rated customers. The prime rate is determined by the Federal Reserve and published in the Wall Street Journal.

Principal Balance
The amount of debt owed before interest charges and fees are included.

Revolving Credit
To carry over a debt from one month to the next, thus incurring interest charges.

Transaction Date
The date a purchase is made or cash is withdrawn.

Transaction Fee
A fee that is charged each time a certain transaction takes place, such as cash advances.

Two-Cycle Average Daily Balance
A two-month period used to calculate your interest. This means that interest is included on purchases made from the previous statement.

Variable Interest Rate
A variable interest rate is based on fluctuating rates in the banking system, such as the Prime Rate.

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