Credit Card Terms Explained
Understanding credit card terminology is essential for making informed decisions about your finances. Here's your comprehensive guide to common credit card terms and what they mean.
Interest Rate Terms
- Annual Percentage Rate (APR)
The yearly interest rate charged on balances, typically ranging from 12.95% to 20.95% in NZ.
- Purchase Rate
The interest rate applied to regular purchases made with your card.
- Cash Advance Rate
Higher interest rate charged on cash withdrawals, usually around 22.95%.
- Balance Transfer Rate
Special rate offered when transferring debt from another card, often 0% for a promotional period.
Fee-Related Terms
Regular Fees
- Annual fee
- Additional card fee
- Foreign transaction fee
- Cash advance fee
Penalty Fees
- Late payment fee
- Over-limit fee
- Returned payment fee
- Card replacement fee
Payment Terms
Minimum Payment
The lowest amount you must pay each month, typically 2-3% of the balance or $10, whichever is higher.
Due Date
The date by which you must make at least the minimum payment to avoid late fees.
Statement Period
The billing cycle (usually monthly) for which transactions are recorded.
Grace Period
Time between purchase and when interest begins accruing, typically 44-55 days.
Credit Limit Terms
- Credit Limit
Maximum amount you can spend on your card
- Available Credit
Amount of credit limit currently available to use
- Credit Utilization
Percentage of credit limit currently being used
- Over-limit
Exceeding your approved credit limit
Rewards and Benefits Terms
Rewards Rate
Amount of points, cash back, or miles earned per dollar spent.
Sign-up Bonus
Special rewards offered for new cardholders who meet spending requirements.
Rewards Categories
Different types of purchases that may earn bonus rewards.
Points Value
The monetary worth of reward points when redeemed.
Security Terms
- PIN
Personal Identification Number for transactions and cash withdrawals
- CVV
Card Verification Value - security code on back of card
- Chip & PIN
Security feature requiring PIN entry for in-person transactions
- Two-Factor Authentication
Additional security step for online purchases
Insurance and Protection Terms
Purchase Protection
Insurance for items bought with the card against damage or theft.
Extended Warranty
Additional warranty coverage on purchases beyond manufacturer's warranty.
Travel Insurance
Coverage for travel-related issues when trips are paid with the card.
Fraud Protection
Zero liability for unauthorized transactions.
Common Questions
What's the difference between APR and interest rate?
APR includes both the interest rate and any mandatory fees, giving you the total cost of credit.
How is minimum payment calculated?
Usually the greater of a percentage of your balance (2-3%) or a fixed amount ($10-$25).
What does 'up to 55 days interest-free' mean?
The maximum time you have to pay your purchase balance before interest is charged, if you pay your statement in full each month.
Key Takeaways
- Understand interest rates and how they're applied
- Know all potential fees before applying
- Learn payment terms and grace periods
- Familiarize yourself with rewards structures
- Review security and protection features