Here, we’re going to clarify several of the terms used in credit card offers. Much of the vocabulary used in credit card offers can be intimidating, but it doesn’t have to be. Here’s a handy guide to these words and what they mean.
APR – APR stands for Annual Percentage Rate, which represents the interest rate levied onto a balance that remains on a bill after a grace period.

Sometimes, credit card companies will set different APRs for different balances. For example, a cash advance will incur a higher APR than a standard purchase. If you’re late in making payments, your APR might increase. Fixed APRs stay at the same rate, and can only change if the creditor notifies the customer.

Variable APRs can fluctuate all the time.
Credit Limit – The amount you can charge on the card has a maximum, and this is the credit limit. Don’t go over this amount, or you might have to pay an over-the-limit fee.

Balance – This term represents the total expenses that you’ve accrued on the credit card. Add up all purchases, finance charges, and fees. Good credit cardholders will always keep this number lower than the credit limit.

Finance Charge – This charge represents the total cost of keeping a revolving balance. The balance and APR are used to calculate the finance charge.

Grace Period – The grace period is the time you are allotted to pay your balance without incurring a penalty. You should always strive to pay your bills during the grace period.

Familiarize yourself with these terms before your get a credit card. You’ll be an educated consumer, and you’ll be better equipped to establish a good line of credit.