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Credit cards can offer you benefits and protections and give you more time to pay for expenses. You can also use a credit card to improve your credit score and earn rewards. Get the most out of your card by learning about common credit card terms and fees.
Common Credit Card Terms
Credit card terms describe how cards work and your responsibility when using a credit card.
1. Annual percentage rate (APR)
The APR of a credit card is the interest rate that the card issuer charges.1 Unlike loans, the APR doesn't include potential fees.2
As of May 2024, the average purchase APR on credit card accounts that were being assessed interest was 22.76%.3 But cards may have separate APRs for purchases, balance transfers and cash advances.2
With purchases, you won't generally accrue interest if you pay your balance in full each month. If you pay less than the full statement balance, the amount you revolve and your new purchases may start to accrue interest daily. This interest is calculated using the daily rate, which is typically the purchase APR divided by 360 or 365.2
2. Authorized user
A primary cardholder — the person who opened the credit card and is responsible for payments — can often add an authorized user to their account. It’s a common arrangement among partners who share expenses and parents who add a child as an authorized user.
The authorized user receives a card, can make purchases and might receive some cardholder benefits. But the primary user is responsible for all the charges, including those made by the authorized user.4
3. Available credit
Your available credit is the difference between your current balance and credit limit.5 For example, if your card has a $5,000 credit limit and a $3,000 current balance, you have $2,000 in available credit. Your available credit can change as new transactions are processed and payments are made.
4. Balance transfer
A balance transfer is when you move a balance between credit cards — essentially using a credit card to pay off part of another card’s balance. Sometimes, you can also transfer funds to a bank account.
Transferring balances can be beneficial because some cards offer a promotional balance transfer APR, such as an introductory 0% APR on balance transfers during your first 12 months with a card. But you may need to pay a fee on each transfer and pay interest if you don’t pay off the transferred balance before the promotional period ends.6
5. Billing cycle
A credit card’s billing cycle or billing period is the time between your account’s two statement closing dates. Billing cycles tend to be around 30 days long, but the exact length can vary from one month to the next.7 The card issuer will create and send you a statement at the end of each billing cycle.
6. Card verification value (CVV)
A card verification value (CVV) is a three- or four-digit code that’s printed on your credit card. You’re commonly asked to share this number when making purchases online or over the phone as a fraud prevention measure. Even if a fraudster steals your card’s number and knows your address, they might not be able to make a fraudulent purchase if they don’t know the CVV.8
7. Cash advance
You might be able to use your credit card to get a cash advance by withdrawing money from an ATM or going to a bank teller.4 Cash advances generally have an additional cash advance fee and a higher APR than purchases.2 Additionally, even if you pay your statement balance in full each month, the cash advance and fee might start to accrue interest immediately.2
8. Credit card rewards
Rewards credit cards offer cash back, miles or points when you make eligible purchases.
9. Credit card statement
Your monthly credit card statement shows a summary of your account activity during the previous billing period, payment information and a line-by-line breakdown of the transactions.
In the statement, you might see the following:4
- Statement balance. At the end of each billing cycle, the transactions from the period are added to the account’s previous balance to determine the new balance — also called the statement balance.
- Due date. The due date for your bill will generally be around 21 to 25 days after the close date for the billing period.
- Minimum payment. This will depend on your card’s terms and the statement balance. If you're not carrying a balance and don't use your card, you might not have a minimum payment. When you do have a minimum payment, however, you must pay at least this amount by the due date to avoid a late fee.
Your statement may also contain other important information, such as changes to your account and the APR.
10. Credit limit
Your card’s credit limit determines how high your balance can go. Once your current balance reaches the credit limit, the card issuer might decline new transactions. They can choose to selectively let you spend more than your credit limit. But if you do, you may be required to repay the over-limit amount in addition to your minimum payment.9
11. Current balance
The current balance is the balance you see when you log in to your accounts. Purchases, cash advances, balance transfers, fees and interest can all increase your card’s current balance. Payments, statement credits and refunds can lower the current balance.10
12. Grace period
The period between your statement closing date and the due date is also called the grace period. If you pay your statement balance in full each month, your purchases won’t accrue interest throughout the billing cycle or grace period. Cash advances and balance transfers might not have a grace period, and they could start to accrue interest immediately.11
13. Penalty APR
A penalty APR is a higher APR that can be applied to your account if you miss a payment — even if you've had your account for less than a year.2 Initially, the penalty APR only applies to new purchases.12 However, if you’re 60 or more days past due, the penalty APR can also apply to existing balances.12
14. Promotional financing
Some credit cards offer promotional financing, such as a temporary 0% APR, deferred interest or a reduced APR with fixed monthly payments. These offers can help you pay over time.
For example, the CareCredit credit card offers two types of promotional financing options:
- Deferred interest financing. No interest if paid in full within six, 12, 18 or 24 months on qualifying purchases of $200 or more at enrolled provider locations and select retailers in the CareCredit network. Interest will be charged to your account from the purchase date if the promotional balance is not paid in full within the promotional period. Minimum monthly payments required.*
- Reduced APR financing. Reduced APR and Fixed Monthly Payments Required Until Paid In Full on qualifying purchases made with your CareCredit credit card at enrolled provider locations in the CareCredit network.** Purchases of $1,000 or more are eligible for a 24 months offer with a 17.90% APR, 36 months offer with an 18.90% APR, or a 48 months offer with a 19.90% APR. Purchases of $2,500 or more are eligible for a 60 months offer with a 20.90% APR.**
15. Variable or fixed APR
Your card’s APR can depend on the card issuer, the specific card, your creditworthiness and whether your card has a fixed or variable rate.13
- Fixed APR. If your card has a fixed APR and you’re making payments on time, the card issuer generally can't increase your card’s APR during the first year. After that, it can increase the APR after giving you at least a 45-day notice, but the higher rate only applies to new transactions.12
- Variable APR. If your card has a variable APR, your APR can rise or fall at any time based on changes in a benchmark rate that the card issuer doesn't control. For example, the prime rate is a commonly used benchmark that’s determined by how much interest large financial institutions charge each other to borrow money. But similar to fixed-rate cards, the issuer can increase the non-variable portion of the APR after the first year if it gives you a 45-day notice.12
Common Credit Card Fees
You might encounter different types of fees when opening or using a credit card. Some of these you can avoid based on how you use and manage your card, others can be avoided by looking for a card that doesn’t charge a fee.
16. Annual fee
Some credit cards have an annual fee, which you may be charged when you first open your account and every 12 months going forward, some up to $500. Cards with annual fees may offer more rewards and benefits, but you can look for cards without an annual fee if you want to avoid paying to have a credit card.14
17. Cash advance fee
A cash advance fee is an additional charge that’s added to your balance when you use your card to get cash from an ATM or bank. Some card issuers also treat cash-like purchases as cash advances, such as when you buy a money order or prepaid gift card.4 To avoid the fee, try not to use your card for these types of transactions.
18. Balance transfer fee
You may have to pay a balance transfer fee every time you transfer a balance using your card.15 The fee is often around 3% or more of the amount you transfer, with a minimum amount per transfer.14 Some cards have promotional balance transfer offers with temporarily higher or lower balance transfer fees.15
19. Foreign transaction fee
A foreign transaction fee (also known as a currency exchange fee) may be charged when you make online and in-person transactions that happen in a different currency. They can also apply when there’s an in-person transaction while you’re outside the United States, even if the merchant lets you choose U.S. dollars as the currency.16
You can avoid this fee by finding a credit card that doesn’t charge foreign transaction fees — a common feature among travel rewards cards.16
20. Late payment fee
A late payment fee is a common fee that card issuers charge if you don’t make your minimum payment by the bill’s due date. You can sign up for account alerts to remind you about upcoming due dates or enroll in autopay to avoid accidentally missing payments. Just make sure your connected account has enough funds for the payment.17
Although card issuers can charge you a late payment fee if you're just one day late, they can't report your account as past due to the credit bureaus until your payment is at least 30 days late. So, if you can quickly bring your account current, the late payment might not hurt your credit scores.17
21. Returned payment fee
A returned payment fee might apply if you attempt to make a payment that can’t be processed. For example, if you don’t have enough money in your checking account and a check bounces, or if you try to make an electronic payment from a closed account.18
You can try to avoid this fee by double-checking the payment amount and your balance before making a payment. If you don’t have enough money for a minimum payment, consider contacting the card issuer to discuss your options.
Managing Health and Wellness Costs With the CareCredit Credit Card
If you are looking for an option to help manage your health and wellness costs, consider financing with the CareCredit credit card.*** Get the care you want or need with easy, flexible financing options that allow you to pay for out-of-pocket expenses over time. Use our Acceptance Locator to find a provider near you that accepts CareCredit. Continue your wellness journey by downloading the CareCredit Mobile App to manage your account, find a provider on the go and easily access the Well U blog for more great articles, podcasts and videos.
Your CareCredit credit card can be used in so many ways within the CareCredit network including vision, dentistry, cosmetic, pet care, hearing, health systems, dermatology, pharmacy purchases and spa treatments. How will you invest in your health and wellness next?
Author Bio
Louis DeNicola is a freelance writer who specializes in consumer credit, finances and fraud. He has several credit-related certifications and works with many lenders, publishers, credit bureaus, Fortune 500s and fintech startups. Outside of work, you can often find Louis at his local climbing gym or cooking up a storm in the kitchen.
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