Credit Cards have recently become invaluable tools. They offer convenience, flexibility, and various benefits to cardholders. However, understanding Credit Cards can sometimes feel like deciphering a complex language, thanks to their own set of terminologies and jargon. So, here is a quick guide that covers them. That way, you can assess your Credit Card eligibility and knowledge.

Credit limits

The credit limit is the maximum credit amount you get from the issuing bank. It represents the total sum that can be charged to the Credit Card without incurring penalties or fees. Exceeding the credit limit may result in over-limit fees or declined transactions.

Annual percentage rates

The APR is the annualised interest rate imposed on outstanding balances on the Credit Card. It includes the interest rate and any extra fees issued by the issuer.

Minimum payments

The minimum payment is the smallest amount that a cardholder needs to pay towards their Credit Card balance each month to keep the account in good standing. Paying only the minimum payment may result in accruing interest on the remaining balance.

Card verification value

CVV full form is Card Verification Value. It is a 3/4-digit security code printed on the back of most Credit Cards. It is an extra layer of security for online transactions, verifying that the cardholder possesses the physical card. Providing the CVV is often required when making online purchases or transactions.

Grace period

The grace period is the period between the end of a billing cycle and the due date. During this time, cardholders can pay their Credit Card bill without incurring interest on purchases made during the billing cycle. Grace periods often range from 21 to 25 days.

Rewards programme

Many Credit Cards offer rewards programmes that help you earn points, miles, or cashback on your purchases. Rewards can be redeemed for merchandise, travel, statement credits, or gift cards, providing additional value to cardholders. Hence, this is something you must learn about besides Credit Card eligibility terms.

Cash advance

A cash advance lets you withdraw cash from your Credit Card. However, cash advances involve higher interest rates and fees than regular purchases. You should use cash advances sparingly and be aware of the associated costs.

Balance transfer

A balance transfer involves moving existing Credit Card debts from one card to another to benefit from lower interest rates or promotional offers. Balance transfers can reduce interest costs and consolidate debt into a single account.

Annual fees

Sometimes, Credit Cards charge an annual fee for the privilege of card membership. Annual fees vary depending on the card issuer and the benefits offered. You should weigh the benefits against the cost of the annual fee to see if the card is worth keeping.

Conclusion

Educating yourself about these essential Credit Card terminologies empowers you to understand the card with confidence.