What do credit card terms really mean?

Confused about what different credit cards have to offer? You're not alone. Here's a quick guide to some of the most common things you'll see on a credit card application.

Annual Percentage Rate (APR)

The APR is the cost of your credit. It’s expressed as a yearly rate—the lower the APR, the less interest you pay. Many cards offer an initial period (usually around six months) with a lower APR.

Some cards are fixed rate, meaning that the APR stays the same. Others are variable rate, which means that the card's issuer can change your APR as national interest rates or other indexes change. These changes raise or lower your account’s finance charges. If you opt for a variable rate card, the issuer must disclose to you that the rate may change. The issuer must also tell you other information, including which index is used to determine your rate change, what additional amount (the margin) will be added to your rate, and how often your rate may change.

Free Period / Grace Period

Many cards give you the opportunity to avoid finance charges on your credit card purchases by offering a free or grace period. This is the time between when you make a credit card purchase and when the card company begins charging you interest on that purchase. Paying your card balance in full before the grace period ends prevents finance charges from being added to your account.

Annual Fees

Some, but not all, card issuers charge annual participation or membership fees. These fees typically range from $25-$50 for standard cards and $75 or more for gold or platinum cards.

Transaction Fees and Other Charges

Other costs may be included in your credit card. Getting a cash advance, making a late payment, or exceeding your credit limit are some of the most frequently occurring charges to a credit card account. Some cards will charge a monthly fee even if the card isn’t used.

Customer Service

Most cards offer 24-hour toll-free customer service telephone numbers.

Special Offers and Benefits

Credit cards may offer additional perks, such as discounts, rebates or cash back offers. Many cards offer bonus points or frequent flyer miles with spending. Card issuers may also offer insurance and credit card protection. Companies may charge additional fees for some benefits.