11 Credit Card Terms Explained in Plain English
So you have your first credit card. Congratulations! But don’t swipe it just yet.
Better you start shopping, it helps to know these common credit card terms to avoid surprises once the bill shows up. We’ve explained them to you in plain English:
The annual fee is like the service charge for the use of your credit card. Depending on your credit card company, the annual fee can range from P1,200 to P5,000.
But you can get your annual fee waived if you have a good history of paying the full balance on time every month. Don’t hesitate to call your bank and ask.
A balance transfer allows you to move outstanding debt from one credit card to another, usually from a card with a high interest rate to one with a lower interest rate.
Just be wary of high balance transfer fees, which can have interest rates of 8% to 18% per annum. Make sure to check all the fees involved before doing a balance transfer.
You can use your credit card not only to pay for merchandise but also to withdraw cash either through an ATM or over the counter. This is called a cash advance, and every bank has a threshold of how much you can withdraw at a given time.
But like balance transfer, cash advance fees can be pretty high, typically 3% to 5% of your withdrawal fee. It also has a high interest and service fees.
A credit card chargeback happens when a transaction is reversed, and your money is returned from the merchant.
You can initiate a chargeback by filing a dispute with your credit card company if you think something’s wrong with your bill.
Make sure that you keep receipts, previous bills, and online transaction copies so that you can provide documentary proof as needed.
The credit limit is the amount of money you can charge to your credit card.
Each credit card has a different credit limit, usually depending on your income level and previous credit card history.
The grace period is the time between your cut-off and payment due date where you can pay your credit card balance without paying interest.
Once the grace period has lapsed, your remaining balance will be carried over the next month and you will get charged with an interest fee. So always make sure to pay your bill on or before the due date!
The interest rate on a credit card is the fee you pay for late payments.
Banks typically charge an interest rate of 2.7% to 3.5% every month. The higher the interest rate, the more you will pay.
You can avoid paying interest if you pay your balance in full every month.
Minimum amount due
The minimum amount due is the lowest amount of money that you should pay each month.
It’s important to know that interest will be charged on your remaining card balance. Always pay your balance in full. Don’t just settle for the minimum amount due.
Secured credit card
Having a hard time getting approved for a credit card? Consider applying for a secured credit card instead.
Unlike traditional credit cards, you need fewer requirements to get a secured credit card. You also need to set up a bank account with an initial deposit that serves as collateral so that each time you miss a payment, the bank will take it out of your deposit.
A secured credit card can help you improve your credit score and make it easier for you to get a regular credit card.
Your statement period or billing cycle typically ranges from 21 to 31 days, depending on your credit card.
A statement period ends on a specific cut-off date, so any activity after that will be credited to the next billing cycle. Your payment due date is about 21 to 25 days after your cut-off date.