Understanding Credit Card Terms (Glossary)

It is a good way to understand credit card terms so that you may stay one step ahead. If you are able to read a credit card application and completely understand all the terms of agreement on your card you’ll be in better form to use your cards with whole responsibility and you may also avoid falling into the credit card debt trap.


Here in this article we are presenting you a glossary of the most common credit card terms that could really help you with your credit card education:

Adjusted Balance Method

Adjusted Balance method is a formula that many card issuers use for the purpose of calculating the amount of your monthly payment. During the month the payments that you made to the credit card account is subtracted from the balance, and finance charges are added on to get the adjusted balance.

Annual Fee

A once-per-year fee is charged by some of the credit card companies from cardholders to use the card. May be its meaning is that the card offers great rewards or travel benefits, or it might also mean that you have got a credit card for people who are having poor credit.

Annual Percentage Rate (APR)


The annual percentage rate (APR) is the amount of interest that is annually charged on a credit card balance. If the card has no balance, then there is no interest charge.

Billing Cycle

Billing cycle is the length of time between billing statements. This can vary from one month to the next. Due dates can be changed due to the fluctuations in billing cycles.

Charge Back

Charge back is a transaction that gets returned and the reason behind that return is a consumer disputing a purchase made from a merchant; or the purchase being non compliant with the merchant account rules could also be the reason of returned transaction.

Credit Line

Credit Line is sometimes referred to as your available credit. The credit line is the total amount that is given to you by your credit card company to borrow. When you have spent all the available credit, you’ve reached your total available credit and now you can not use your credit card until you pay down the balance.

Finance Charges


Finance charges are the total cost of using your credit card. It is expressed in dollars instead of percentages and it includes the interest and other fees.

Fixed Interest Rate

Credit cards that have fixed interest rates don’t show any fluctuation due to the economic conditions. However the rates can be changed by the credit card company, if they provide 15 days notice about the change to the cardholder.

Grace Period

Grace period is a specific period of time when you are allowed to repay your credit card balance without paying any interest or other charges. All credit cards do not offer a grace period.

Minimum Payment

It is shown on your credit card statement. It is the least amount of money that you can send to your credit card company before the due date, so that you may avoid paying a late fee for not making the payment.

Monthly Periodic Rate

Monthly periodic bill is a part of the formula which is used to compute someone’s credit card bill. The amount of the outstanding credit card balance is multiplied by it in order to get the interest rate charge for the billing cycle.

Secured credit cards


It is the requirement of secure credit cards that the cardholder has to give up collateral in exchange for receiving and using the secured credit card. Usually a deposit is required by the secured credit card in the amount of the credit limit.

Universal Default

Universal default is a clause in which it is stated that if a cardholder makes late payment to a creditor, than that credit card company has the right to raise the interest rate on that credit card and moreover any other credit card accounts that the individual has and that participates under the universal default, are able to give rise to the interest rates, too. So if though only one time you have made a late payment but it can result in all of your credit card accounts getting higher interest rate charged.

Variable Interest Rate

Some credit cards have variable interest rates. What it means is that their interest rates change when economic indicators change. Sometimes this is called a floating rate.

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