Credit Card Basics

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Credit Card

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A card issued by a financial institution allowing the cardholder to borrow money to make purchases, with the obligation to repay the borrowed amount, often with interest.

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Credit Limit

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The maximum amount of credit a lender is willing to extend to a borrower on a credit card or loan.

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Interest Rate

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The percentage charged by a lender for borrowing money, usually expressed as an annual percentage rate (APR).

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Annual Percentage Rate (APR)

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The yearly interest rate charged for borrowing money, including fees and other costs.

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Minimum Payment

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The smallest amount a borrower must pay each month on a credit card balance to avoid late fees and penalties.

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Balance

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The total amount owed on a credit card or loan.

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Credit Utilization

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The percentage of a borrower’s available credit that is being used, which affects credit scores.

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Late Fee

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A fee charged when a credit card payment is made after the due date.

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Credit Score

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A numerical representation of a person's creditworthiness, typically ranging from 300 to 850, based on factors like payment history, debt levels, and length of credit history.

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Credit Report

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A detailed report of an individual’s credit history, including information on loans, credit cards, payment history, and credit inquiries.