Understanding a Credit Card

25 terms by SHendrickson 

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Credit card terminology for personal finance.

Annual fee

A yearly fee that may be charged for having a credit card

Annual percentage rate (APR)

The cost of credit expressed as a yearly interest rate

Balance transfers

The act of transferring debt from one credit card account to another

Borrower

The person or organization that is receiving money from a lender

Closed-end credit

A loan which the borrower must repay the amount in a specified number of equal payments

Credit

When goods, services, or money is received in exchange for a promise to pay a definite sum
of money at a future date

Creditworthiness

An individuals' ability and willingness to pay the money back

Credit application

A form requesting information about a person's ability to repay credit

Credit card

Pre‐approved credit which can be used for the purchase of goods and services now and
payment of them later

Credit investigation

A comparison of information on a credit application to information on a credit report

Credit limit

The maximum dollar amount that can be charged to a credit card

Credit report

A record of a consumer's credit history that includes information about credit card use as
well as the use of other types of credit

Credit score

A number that summarizes an individual's credit record and history

Debit card

A plastic card which looks like a credit card but is electronically connected to the
cardholder's bank account

Interest

The price of money

Introductory rate

The APR charged during the credit card's introductory period after a credit card account is opened

Late payment fee

Fee charged when a credit card holder does not make the minimum monthly payment by the
due date

Lender

The person or organization who has the resources to provide a borrower with a loan

Open-end credit

Extended as a line of credit established in advance so that the borrower does not have to
apply for credit each time new credit is desired

Over-the-limit fee

Fee charged if the credit card account balance goes over the set credit limit

Penalty APR

The interest rate charged on new transactions if the penalty terms in the credit card contract
are triggered

Pre-approved

When someone has passed an initial credit check

Prime rate

An index that represents the interest rate most banks charge their most creditworthy
customers

Schumer Box

Displays the main costs of a credit card

Variable-rate APR

An APR that may change depending on other factors, such as the prime rate

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