In the financial world, there are a lot of words that can confuse the common person. Financial institutions use these credit terms to explain the product being sold but in most cases, the customer or client only gets more confused. It is very essential that a client is aware of certain terms. This will help in planning the use of credit and help the client make decisions that are important to their financial welfare. Below are a few of the major credit terms that can help when getting a you are approved for credit:
Credit Card – it is a piece of plastic card that contains a chip or magnetic strip containing the credit card holder’s information and credit line. This piece of card is used when the card holder makes a purchase of goods and services from an accredited merchant.
Charge Card – a charge card has the same concept as a credit card. The only difference a charge card holds is that the outstanding balance needs to be cleared in full ever due date.
Annual Percentage Rate (APR) – an Annual Percentage Rate used by the credit card issuer as basis to estimate the cost of using credit or loan. It is shown as an annual interest rate. An annual percentage rate is then divided by the number of periods that a card holder needs to pay in a year and that rate becomes the basis for interest on the outstanding balance at a given period.
Grace Period – the grace period is the number of days beyond the due date that a borrower is allowed to pay the fees. Additional finance charges are not applied until the grace period lapses.
Annual Fees – these are fees that a credit issuer often charges the credit holder. It serves as a subscription fee for being allowed to have a credit line against the credit issuer.
Credit Limit – credit limit is the maximum amount of credit that a credit issuer grants a credit holder through a credit line. This is also the maximum amount that a borrower can spend in purchasing goods and services paid via a credit card.