Loanfactz Definitions

Credit Card

A credit card, (or charge card) is a plastic card issued to you by a bank or business. It is a form of borrowing that authorizes you to buy goods or services on credit and pay for them later. Payment is usually made monthly and you can either pay in full or pay a minimum payment with * interest charged on any unpaid balance. You must fill out an application and be approved for the card. There is a credit limit as to how much you can purchase. Credit cards have high interest rates, so be sure to compare terms and fees before you agree to open a credit card. The Truth in Lending Act prohibits the unsolicited issuance of credit cards and limits cardholder liability for unauthorized use. Some credit cards charge you an * annual fee for having the card, or other fees under certain circumstances, such as:

• Set Up Fee - charged when a new credit card account is opened.
• Cash Advance Fee - charged when you use the card for a cash advance, may be a flat fee, for example, 3 dollars, or a percentage of the cash advance, for example, 3 percent.
• Balance Transfer Fee - charged when you transfer a balance from another credit card, for example, your credit card company may send you checks to pay off the other card. The balance is transferred when you use one of these checks to pay the amount due on the other card.
• Late Payment Fee - charged if your payment is received after the due date.
• Over the Credit Limit Fee - charged if you go over your credit limit.
• Credit Limit Increase Fee - charged if you ask for an increase in your credit limit.
• Return Item Fee - charged if you pay your bill by check and the check is returned for non-sufficient funds (your check bounces).

Glossary For This Page
(In Alphabetical Order)

* Annual
Every year.

* Interest
The cost you pay to borrow money from a lender, expressed as a percentage of the amount borrowed. The interest is calculated in the monthly payment you make to the lender.

References:
www.federalreserve.gov/Pubs/shop/

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