Credit Card Jargon buster

Continuing further from the previous article, Selecting a Credit Card, here are some key terms you will find in the Summary Box that appears in all cards’ marketing material or on your statement, with a simplified explanation of what they mean.

These terms are the most common terms that are frequently used for credit cards, and it is extremely important that you understand them.


APR (Annual Percentage Rate)
This is an overall measure of the total cost of borrowing on a credit card and won’t just include the interest rate but any compulsory fees as well. You can compare this between credit cards.


Monthly interest rates
This is the cost each month for borrowing on the card and may vary for different kinds of transaction such as purchases, cash advances, balance transfers and so forth.


Interest free period
Many credit cards have an initial interest free period – which means there is no charge for borrowing over a set time. Usually this only applies to purchases
and balance transfers.This part of the Summary Box will tell you exactly what
terms and conditions apply.


Allocation of payments
When you make a payment to your credit card account to clear your outstanding debts your card issuer may pay off different kinds of borrowing in a particular order (e.g. purchases before cash advances).


Minimum repayment
Every month that you have an outstanding balance you have to make a payment on your account – this tells you the minimum you must repay.


Fees
Any monthly or annual fees on your card are listed here. If your card does not have a fee, this box will say "none" or "not applicable". Any conditions will also be shown here.


Charges
This section lists charges you might incur in using your card such as cash advances or for using your card abroad.


Default charges
If you breach the terms of your agreement, such as by failing to pay the minimum repayment or going over your credit limit – your card company may charge you.


Link to Previous Article: Selecting a Credit Card,