The Credit Card Glossary
Credit cards come with their own vocabulary. Most glossaries define terms with other jargon. This one doesn't. Every definition here is in plain English, with a link to our deeper article where one exists.
Annual fee
A yearly charge for holding the card, billed to your statement. Ranges from $0 to $695. A card with a $95 fee needs to earn you more than $95 in value to be worth keeping. When a fee card beats a free card →
APR (Annual Percentage Rate)
The interest rate charged on balances you carry. Despite the name, it compounds daily, not annually. A 24% APR means you're charged about 0.066% of your balance per day. How interest actually works →
Authorized user
Someone who has permission to use your card but isn't legally responsible for the debt. They get their own card with their name, but the bill goes to you. Authorized user accounts appear on both credit reports, which can help build the user's credit — or hurt it, if the primary account has negative marks.
Balance transfer
Moving debt from one credit card to another, usually to take advantage of a 0% intro APR. Comes with a fee (typically 3-5% of the transferred amount). Full balance transfer guide →
Billing cycle
The period (usually about 30 days) between one statement closing date and the next. All purchases made during a billing cycle appear on that cycle's statement.
CARD Act
The Credit Card Accountability Responsibility and Disclosure Act of 2009. The federal law that banned retroactive rate increases, required 21-day grace periods, and created the Schumer Box. Full CARD Act explainer →
Cash advance
Withdrawing cash from an ATM using your credit card. The most expensive way to get cash — no grace period, higher APR, and immediate fees. Why you should almost never do this →
Cash back
A rewards structure where you earn a percentage of each purchase back as cash (typically 1-6%). The simplest form of credit card reward — no transfer partners, no points valuations, no redemption strategy. You spend money, money comes back.
Chargeback
A dispute process where your card issuer reverses a charge on your statement. Used for fraud, billing errors, and goods/services not as described. How to win a dispute →
Credit limit
The maximum amount you can charge to the card. Set by the issuer based on your income, credit history, and existing credit. Why your limit is what it is →
Credit utilization
The percentage of your total available credit that you're currently using. Calculated as: total balances ÷ total credit limits. The second-largest factor in your FICO score. Under 10% is optimal; under 30% is acceptable; above 30% starts hurting. Deep dive →
5/24 rule
Chase's unwritten policy of denying credit card applications from anyone who has opened 5 or more new credit card accounts (any issuer) in the past 24 months. Full explainer →
Grace period
The time between your statement closing date and payment due date (minimum 21 days). If you pay the full statement balance within the grace period, you pay zero interest. The grace period is what makes credit cards free for people who pay in full.
Hard inquiry (hard pull)
A credit check triggered by a credit application. Appears on your credit report, visible to other lenders, and temporarily reduces your score by 3-5 points. Stays on your report for 2 years. What happens when you apply →
Interchange fee
The fee merchants pay to accept credit card payments — typically 1.5-3.5% of the transaction. This is the primary funding source for credit card rewards. Who pays for your rewards →
MCC (Merchant Category Code)
A four-digit code assigned to every merchant that accepts credit cards. This code — not the store name or what you bought — determines which rewards category your purchase falls into. Why your rewards rate is a suggestion →
Minimum payment
The smallest amount you can pay to keep the account current — typically 1-2% of the balance or $25. Paying only the minimum leads to years of debt and thousands in interest. It's a survival mechanism, not a repayment plan.
Penalty APR
A higher interest rate (typically 29.99%) imposed after you're 60+ days late on a payment. Applies to existing and future balances. The issuer must review after 6 months of on-time payments, but there's no guarantee of reversal.
Points / miles
Reward currencies earned on purchases. Points and miles have variable value depending on how you redeem them — from 0.5¢ (bad redemption) to 5¢+ (premium travel partner transfer). What they're actually worth →
Product change
Switching from one card to another within the same issuer's lineup (e.g., Sapphire Preferred → Freedom Unlimited). Preserves your account history, credit limit, and age. Doesn't trigger a hard inquiry. The recommended alternative to closing a card with an annual fee. How to request one →
Schumer Box
The standardized disclosure table required on every credit card application, showing rates, fees, and terms in a consistent format. Named after Senator Chuck Schumer. How to read one →
Secured credit card
A card requiring a refundable cash deposit that acts as your credit limit. Designed for people with no credit history or poor credit. The deposit reduces the issuer's risk, making approval easier. Secured vs. unsecured explained →
Soft inquiry (soft pull)
A preliminary credit check that doesn't affect your score. Used for pre-qualification, account reviews, and checking your own credit. What pre-approved actually means →
Statement balance
The total amount owed at the end of a billing cycle. This is the number to pay in full each month to avoid interest. Not the same as your current balance (which includes purchases made after the statement closed). How to read your statement →
Welcome bonus
A one-time reward (cash, points, or miles) earned by meeting a minimum spending requirement within a set period after opening a new card. Often the single most valuable feature of a credit card in year one. Tracking bonus changes →