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| Credit Card Terminology |  Average Daily Balance – Your payment due is calculated by credit card companies by means of the average daily balance method. It is calculated by adding every day's balance and then dividing the total by the total number of days in the billing cycle. This average daily balance is then multiplied by the credit card's monthly periodic rate, which is determined by dividing the annual periodic rate by 12. A card with an annual rate of 18 percent would have a monthly periodic rate of 1.5 percent. If that card had a $500 average daily balance it would yield a monthly finance charge of $7.50.
Annual Percentage Rate (APR) – If you want to obtain the loan, you need to pay the yearly rate of interest which includes fees and costs. Lenders are obligated by law to demonstrate the APR. The annual percentage rate is formulated by taking the average compound interest rate over the term of the loan, that way borrowers can compare loans.
Balance Transfer – A balance transfer is the act of moving your unpaid credit card debt from one credit card issuer to another credit card issuer. Credit card companies often propose affordable rates to encourage incoming balance transfers and high fees to discourage outgoing balance transfers.
Cash Advance Fees – A fee charged by the bank for applying your credit card to get cash. This fee can be stated as a percentage of the amount withdrawn or a flat per-transaction fee. The fee may be expressed as "3%/$10". This means that the cash advance fee will be the greater of 3 percent of the cash advance amount or $10. The bank may limit the amount of that can be charged. The fee may then be directly deducted from the amount you received or the fee may be posted to your bill.
Card Holder Agreement – The card holder agreement is the written statement that shows the terms and conditions of the credit card account. Federal Reserve regulations require this agreement. By law, the card holder agreement must contain the Annual Percentage Rate (APR), annual fee if applicable, the monthly minimum payment formula, and the customers rights when disputing billing matters. It is possible to make changes to the card holder agreement at anytime by the issuer with a written advance notice. The rules for making changes to the card holder agreement are various in different states. The rules that use are the rules in the home state of the issuer, not those of the card holder.
Finance Charge – The charge of applying the credit card. The finance charge includes interest cost and other kind of fees.
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