Learn the Basic Credit Card Terminology

If you’re deciding to buy your first credit card, it’s crucial to know the important terms. 

Credit Card

A physical card that is connected to your credit account. Credit cards are utilized to make purchases via the credit account. The payment amount is deferred until the credit card holder will receive a bill for paying for the monthly purchases. 

Unsecured credit card 

A credit card does not need any security deposit from the cardholder. Many credit cards are unsecured.

Secured credit card

A credit card needs a security deposit when the person opens the account.

 

Cash advance

Utilizing the credit card to gain cash. This advance usually has a higher annual percentage rate and it applies interest instantly. This is why cash advance is not typically preferred.

Balance transfer

Transferring the balance from one credit card to another. This transfer is usually made because a card has a poor annual percentage rate. Many credit cards do not come with this feature.

Credit limit

This is the maximum balance of a card and only this amount can be used on purchases. All credit cards have varying limits. For instance, a credit card can have a limit of $10,000 but a cash advance limit of $3,000. This means that out of the $10,000 balance limit, only $3,000 can be utilized for a cash advance. 

Available credit

This is the difference between the limit of a credit card and its available credit. In case you have a $400 balance on your credit card with a $10,000 balance limit, the existing available credit will be $600. 

Revolving line of credit

This is a line of credit you can borrow from as long as your credit account is open. Visit https://ikanobank.dk/visa-kreditkort to learn more. 

APR

This is an abbreviation for annual percentage rate and it is the yearly cost of borrowing money. 

Credit score

It’s a number which rates your creditworthiness or the probability that you’ll pay back your balance.