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An introductory Annual Percentage Rate (APR) is the low rate charged by a credit card company for a beginning period of time to attract new card owners. It is also called a teaser rate.

After the introductory period of time is over, the APR goes up to its usual rate. When you apply for a credit card, make sure you understand what the APR will really be once the introductory period is over. A card with a 0 APR or low interest rate in the beginning may not be the best credit card in the long run if the APR after the introductory period is over is too high.

See also:
What is an APR?
What is an introductory period?
What is the difference between a variable APR and a regular APR?
What is a default APR?
What are low APR credit cards / 0% APR credit cards?

The introductory period is the time during which the introductory APR (low rate used to attract new users) is effective. It is often a few months to a year, but it varies for each card.

Always be sure you understand how the APR is calculated, and what it will be, when the introductory period is over. If you are planning to pay off the balance before the introductory period is over, then credit cards with an introductory 0 APR or low APR can actually save you money in the end. However, if you want to own a credit card for an extended period of time then a fixed low interest credit card might work better for you.

See also:
What is an introductory APR?
What is an APR?
What are low APR credit cards/0% APR credit cards?
How do I do a balance transfer?

In the Terms and Conditions of every credit card offer, you will see that the APR is either ‘fixed’ or ‘variable’. Every period you have to pay interest on the money you borrow, The type of APR determines how will this interest rate change from one period to another.

Variable APR means that the APR may change according to economic variables such as the Prime Rate or the LIBOR Rate. Most US credit cards are linked to either the Prime Rate or the LIBOR Rate. For example, suppose the Prime rate is 9% and you see a card that is offering a variable APR of 16% based on the Prime rate. The APR in this case is basically calculated as the prime rate plus 8% (9% + 8% = 16%). If the Prime rate will go up to 11% the APR on the account would go up to 19% (11% + 8% = 19%).

When the credit card offers a fixed APR, it does not actually mean that the APR remains fixed over time. In fact, on the Terms and Conditions you will read that the rates may change even for offers with fixed APR. The term “fixed” APR only means that the APR is not linked to any economic variable and doesn’t change automatically, but the credit card company is still allowed to change it after giving you a proper notice.


See also..
How do I do a balance transfer?
How do I compare credit card offers?
How do I apply for a credit card?
What are low APR credit cards/0% APR credit cards?

A cash advance is kind of like an instant cash loan using your credit card. You find yourself in a situation in which you need some quick cash, say, to buy a used car. You don’t have enough in your bank account, so you use your credit card and take a cash advance. You must be aware that credit card companies charge interest from the date of the advance until it is completely paid back in full, and may also charge a high transaction fee based on the amount of the advance. It is different from a cash back credit card.

Also, remember that when you send in a payment to the credit card company, it will usually be used first pay off any new purchases you have made and not your cash advance balance. In almost all cases, payments are automatically credited to the lower APR balances (usually purchases or balance transfers) first. If you want the payment to go towards paying off a cash advance, rather than toward purchases or balance transfers, you will need to find out from the company how (or if) you can do that. Be sure to read the Terms and Conditions for your particular credit card – payment policies like this one are stated there. Since the APR for a cash advance is almost always higher than the APR for purchases or balance transfers, borrowing cash using your credit card and paying it off over time can be very expensive!

See also:
What is a cash advance fee?
What is a cash back credit card?
What fees do credit cards have?

A balance transfer is the process of moving an unpaid credit card balance to another credit card, usually to take advantage of a lower interest rate. There is nothing wrong with doing this; credit card companies often encourage it. They get a new customer (you) and you get a nice low rate – for a while. Win-Win? Possibly. If you can plan ahead and pay off the debt before the great low rate ends, you win. If you carry a balance – even a little one – you are often saddled with a very high APR; maybe worse than the one you started with.

Often, credit card companies offer teaser rates, or introductory rates as ways to bring new credit customers in. An introductory APR is often quite low or even 0% on a good balance transfer credit card. If it all sounds too good to be true, it might be. You are limited to the amount of available credit on the balance transfer card, and the credit card company decides just how much that amount will be.

Be sure you understand what the balance transfer fees are for your new credit card. They can often be quite high, and might wipe out a considerable amount of what you are saving by moving to the new credit card.

See also:
What is a balance transfer credit card?
What is the difference between a variable APR and fixed APR?
How do I do a balance transfer?
What is a balance transfer check?

A default APR (Annual Percentage Rate) is used in certain cases when you fail to make the minimum payment on your credit card account, or exceed your credit limit by a certain amount. The Default APR is higher than the other APRs for your account.

Factors considered in determining the Default APR include the frequency and severity of account defaults and concerns and any other indications of risky account use. The maximum default APR that a credit card company can charge you is limited by federal and state laws, but even then it is very high!

Example:
A typical Default APR is described like this in the Terms and Conditions:

The Prime Rate plus 23.74% (currently 31.99%) and may vary.

Note: the Prime Rate is the interest rate banks charge their best customers.

See also:
What is an APR?
What is the difference between a variable APR and a fixed APR?
What are the finance charges? How are they calculated?
What is a minimum finance charge?
What is an introductory APR?

A grace period is a period of time a credit card company gives you before it starts charging you interest on the purchases you made. In most cases the grace period is between 20 to 25 days.

However, the grace period is not a free time to pay any bill! Many people don’t know, but in most cases, the grace period is granted ONLY WHEN YOU DO NOT CARRY ANY BALANCE! That means that if you carry a balance of even one cent from the previous period you would have to pay interest on all the new purchases starting from the day of the purchase! This is a good reason to pay your bill at full whenever you can.

You can find the grace period in the Terms and Conditions of the credit card offer. In most cases you will see that these 20-25 days are granted only "when you pay your balance in full". People sometimes are leaving the bill payment to the last day thinking the are saving money by waiting, but in fact, if you carry a balance you are most likely paying interest for any single day since the purchase was made. The solution is simple – don't carry a balance if you are able to avoid it, and complete paying your balance as early as you can.
 
See also...
What are the Terms and Conditions for a credit card?
What fees do credit cards have?
What are the risks of owning a credit card? ...
How do I compare credit card offers?

The billing cycle is the number of days between the last statement date and the current statement date. A statement is a monthly bill sent by a credit card company to the user. It gives a summary of the account information, including balance, purchases, payments, credits, and charges.

Most credit card accounts allow you to carry a balance from one billing cycle to the next; however, you have to pay interest on that balance. Usually, you have to pay at least a certain amount of your balance each time you receive a bill (the minimum payment).

See also:
How does a credit card work?
What is a spending/credit limit?
What is a minimum payment?
What is a default APR?
What are the finance charges? How are they calculated?

An annual fee is the amount your credit card company charges you every 12 months just to own the card whether you use it or not. The fee can range from about $15 up to $300 and it is billed directly to your statement when it is due. When the twelve-month period begins and ends varies from card to card, so do not assume it starts on January 1 of each year.

Many cards come without annual fees, but that feature can change at any time. A card can start out not having an annual fee, but the credit card company can add one at any time (but they must tell you if they do). When you search for a credit card, be sure that you know what the annual fee is if there is one, and that the card is the best credit card for you.

It is definitely a tradeoff when it comes to fees and credit cards. You can find credit cards that come with an annual fee and good rewards or a good APR, or you can find cards with no annual fee, but with a higher APR and less rewards. It helps to look at the total picture when choosing the right credit card for you.

See also:
What fees do credit cards have?
How do I compare credit card offers?
What are the finance charges? How are they calculated?

Finance charges are the total cost of interest and other charges you must pay to carry a balance on your credit card. In other words, the charges for using credit – borrowing today to pay back at a future date. If you have a grace period on your credit card, the money you borrow is “free” until the due date for paying it back. If you do not pay it all back in full before that time is up, you will owe finance charges on the balance.

Finance charges must be listed on your monthly statements as the total dollar amount you must pay for the use of the card. Remember, you can avoid finance charges altogether by paying your balance in full every month.

EXAMPLE:
Finance charges can be calculated this way:
Average daily balance x daily periodic rate x number of days in billing cycle

Let’s say your average daily balance (each day’s balance / total number of days in a month) is $200. Your Annual Percentage Rate (APR) is 18%, making your daily periodic rate (the APR / number of days in a year, or 365) is then 0.049%. The total number of days in your billing cycle is 30.

200 x 0.049% x 30 = $2.96 in finance charges for the month

See also:
How is my balance calculated every month?
What is an APR?
What is the difference between a variable APR and a fixed APR?
What is a minimum finance charge?

Some credit cards have a minimum finance charge. You’ll be charged the minimum amount even if the actual amount of your finance charge should be less. For example, suppose you miss a payment of $5 and your finance charge should be around 1¢. Since the company’s minimum finance charge is $1.00, you’ll have to pay the minimum - $1.00. That’s 99¢ out of your pocket! A minimum finance charge only kicks in when you actually must pay a finance charge. If your finance charge is zero, then the minimum does not apply.

Finance charges must be listed on your monthly statements as the total dollar amount you must pay for the use of the card. Remember, you can avoid finance charges altogether by paying your balance in full every month.

See also:
What are the finance charges? How are they calculated?
What is a grace period?

A cash advance fee is what the credit card company charges you for obtaining cash with your credit card. When you get a cash advance on your credit card account, you are usually charged the fee on the day you make the cash advance.

This fee can be a set amount per transaction or a percentage of the transaction. It is usually about 3% - 5% of the amount drawn, often with some kind of minimum charge. Getting a cash advance also carries with it a high interest cash advance APR, that usually starts the day you make the cash advance – so beware. Note that this APR is not a part of the cash advance fee, but it is a part of your overall cost.

Cash advances can be usually made at many ATMs or sometimes can be delivered by a messenger service.

Depending on the credit card company issuing the card, the cash advance fee may be deducted directly from the cash advance at the time the money is received or it may be posted to your bill on the day you received the advance. The cost of a cash advance is also higher because there generally is no grace period - interest starts adding up from the moment the money is withdrawn.

EXAMPLE:
The fee may be listed on your Terms and Conditions as “2%/$10.” This means that the cash advance fee will be either 2% of the cash advance amount or $10, whichever is more.

See also:
What is a cash advance?
What fees do credit cards have?
How do I compare credit card offers?

The late payment fee is the fee that is charged by the credit card company when your payment is late. If you send in your payment on time, but it is received after the due date, it is still considered a late payment. Late payment fees are quite large, sometimes as much as $35 or more. You can avoid late payment fees by doing the following:

1. Follow your credit card issuer's payment guidelines to the letter! These guidelines are outlined on the back of each credit card bill. Understand the credit card payment processing rules for all of your credit cards.
2. Pay the minimum payment immediately if you think you might forget.
3. Pay your credit card bills ahead of time when you go out of town or on vacation.

See also:
What fees do credit cards have?
What is a minimum payment?
What is a minimum finance charge?

A balance transfer fee is the charge for each time you transfer a balance from one credit card to another credit card. Usually you do this because you are moving your balance from a high interest rate credit card to a 0 APR credit card or low APR credit card and pay a lot less interest. The transfer is done with special checks or forms, or may be offered as an option on some credit card applications, or it can also be done by calling your credit card company and giving them the details about the account you are paying. If you use this method wisely, it can save you a lot of money in interest when you carry a balance over time.

Credit card companies sometimes offer teaser rates to encourage balance transfers coming in and balance transfer fees to discourage them from going out to other credit cards.

See also:
What is a balance transfer?
What is a balance transfer check?
How is my balance calculated every month?
How does a credit card work?

When you go over the credit limit on your credit card (the maximum total amount you are allowed to have on the card), you might be charged an over the limit fee.

It is easier than you may think to go over the credit limit – especially if your limit is low to begin with. Remember, all purchases, cash advances, balance transfers, fees, and finance charges can count toward your limit, so be careful when you use your card when the balance is already near the limit. You can look online for the best credit card or credit card deal with little or not fees of this kind if you often go over your limit.

You can also call the credit card company at any time and ask to have your limit increased. Often they can give you an answer within minutes on the phone.

See also:
What is a spending/credit limit?
What fees do credit cards have?

Along with the ease of use of credit cards comes certain fees and charges. Most credit card companies charge for the following:

Annual fee
Cash advance fee
Balance transfer fee
Late payment fee
Over the limit fee

Some companies charge for other things, such as reporting to credit bureaus, reviewing your account, or providing other services. Be sure to read the information in your credit card agreement to see if there are other fees. Some of the other fees might include:

Wire transfer fee
Stop payment fee
Credit limit increase fee
Setup fee
Return item fee
Pay by telephone fee

See also...
How do I apply for a credit card?
What are the finance charges? How are they calculated?

The Spending or Credit Limit is the maximum amount of charges you can make on your card. Credit card companies generally use this rule of thumb to determine the limit on your credit card debt: debt should be no more than 20 percent of your total income. You can think of your credit limit as the “ceiling” or top amount you are allowed to borrow at one time with your credit card.

EXAMPLE:
If your yearly income before taxes is $50,000, then your credit limit would be $10,000. Your credit limit is determined when the account is opened, but can be increased over time. Contact your credit card company to find out more about how to get a credit limit increase.

See also:
What is an “over the limit” fee?
What is a credit rating?
What is a minimum payment?

If you have ever borrowed money or had credit cards before, you have a history that shows potential lenders whether or not you are a good credit risk. Did you pay off your loan ahead of time or late every month? How many credit cards do you have? What is your job history?

It's easy to get credit if you already have a good credit history and a good credit rating or credit score, but if you do not have a history, you will need to build your credit history. If you have a bad credit history, then you may still be able to get a 'bad credit' credit card, and you should in order to start rebuilding your credit history, even if it has a high APR or other fees or charges.

See also:
What is a credit rating?What is a credit score?
How do I establish credit?
How do I apply for a credit card?
What is a secured credit card?

A credit score is a number which represents an estimate of an individual's financial credit health. A credit score is used by merchants, suppliers, and bankers to determine whether a credit card should be issued. Lenders also use these scores to determine credit limits and interest rates for credit cards they issue.

The most widely used credit score in the United States is called the FICO score. Equifax, Experian, and Trans Union, the three top U.S. credit bureaus (agencies that create credit reports), use this basic scoring formula for their credit reports.

See also:
What is a credit history?
What is a credit rating?
Am I qualified for a credit card?
How do I establish credit?
What do I do if my credit card application is denied?