Credit Card Glossary: Terms Explained in Plain English

Card statements and agreements use a lot of specialized language. Here is what each term means in plain English, in alphabetical order. Rules described here are general; your cardholder agreement sets the terms for your card.

A

Annual fee

A yearly charge some cards add for having the account, often on rewards cards. It is separate from interest.

APR (annual percentage rate)

The yearly cost of borrowing on the card, as a percentage. On credit cards, APR and interest rate are usually the same number (see APR vs. interest rate). Turn yours into dollars with the APR Calculator.

Average daily balance

The average of your balance at the end of each day in the billing cycle. Many issuers charge interest on this figure, which is why paying early in the cycle lowers interest. See how to calculate credit card interest.

B

Balance transfer

Moving debt from one card to another, often to get a 0% or low promotional APR for a set number of months. Compare offers with the Balance Transfer Calculator.

Balance transfer fee

A one-time charge for a balance transfer, usually 3–5% of the amount moved and added to the new balance. See balance transfer fees explained.

Billing cycle

The period between two statements, usually 28 to 31 days. Interest is added up over the cycle and appears on the statement that closes it.

C

Cash advance

Using the card to get cash, from an ATM or with a convenience check. It usually has a fee, a higher APR, and no grace period, so interest starts the same day. See the Cash Advance Calculator.

Compound interest

Interest charged on earlier interest. Many issuers compound daily, adding each day's interest to the balance used for the next day.

Credit limit

The most you can owe on the card at one time, set by the issuer.

Credit utilization

The share of your credit limits you are using, a major credit score factor. Check yours with the Credit Utilization Calculator.

D

Daily periodic rate (DPR)

Your APR divided by 365 (or 360 at some issuers): the rate charged each day. A 24.99% APR is about 0.0685% a day. Try the Daily Periodic Rate Calculator.

Debt avalanche

Paying minimums on every card and putting extra money toward the highest-APR card first. It usually costs the least interest.

Debt snowball

Putting extra money toward the smallest balance first for quick wins. Compare both with the Snowball vs. Avalanche Calculator.

Deferred interest

A promotion, common on store cards, where interest is charged back to the purchase date if you don't pay the full promo balance by the end of the period. It differs from a true 0% APR. See what one could cost with the Deferred Interest Calculator.

Due date

The date your payment must arrive to avoid a late fee. Federal rules require statements to be sent at least 21 days before it.

G

Grace period

The time between the end of a billing cycle and the due date when new purchases don't accrue interest, as long as you paid the previous statement balance in full. Card issuers aren't required to offer one. If you lose it, the issuer still can't charge interest on the part you repaid within the grace period or use double-cycle billing (Regulation Z § 1026.54). See credit card grace period explained.

I

Interest charge

The dollar amount of interest on your statement for the cycle. Estimate yours with the Credit Card Interest Calculator.

Introductory (intro) APR

A temporary low or 0% rate on purchases or balance transfers for a set period, after which the regular APR applies. Plan it with the 0% Intro APR Calculator.

L

Late fee

A charge for missing the minimum payment by the due date. Federal rules cap it at the minimum payment that was due, and a late payment can also trigger a penalty APR. See Credit Card Late Fees, Explained.

M

Minimum payment

The smallest payment the issuer accepts without a late fee, often the greater of a dollar floor or a percentage of the balance plus interest. Find yours with the Minimum Payment Calculator.

Minimum payment warning

The box on your statement showing how long payoff would take, and what it would cost, if you paid only the minimum.

P

Payment allocation

How your payment is split among balances with different APRs. Federal rules require the amount above the minimum to go to the highest-APR balance first.

Penalty APR

A higher rate an issuer may apply after a late payment. For existing balances it generally can't apply unless the payment is more than 60 days late.

Prime rate

The benchmark most variable card APRs follow. Your APR is typically the prime rate plus a margin, so it moves when the prime rate moves.

Principal

The part of your balance that is borrowed money, not interest or fees. Only the part of a payment that exceeds the interest reduces it.

S

Statement balance

What you owed when the billing cycle closed. Paying it in full by the due date is what keeps the grace period on purchases. Your current balance (what you owe today) and payoff amount (today's balance plus interest since the statement) can be higher; see statement balance vs. current balance.

Statement closing date

The last day of the billing cycle. The balance on this date is usually what gets reported to the credit bureaus.

V

Variable APR

An APR tied to a benchmark such as the prime rate, so it can change without your account changing. Most U.S. credit cards have one.

This article is for general educational purposes and is not financial advice. Rates and figures cited reflect industry data available at the time of writing and can change.

Sources

1. What is a grace period for a credit card? — Consumer Financial Protection Bureau. Checked September 25, 2026.
2. Regulation Z § 1026.5 – statements delivered at least 21 days before the due date — Consumer Financial Protection Bureau. Checked September 25, 2026.
3. Regulation Z § 1026.53 – payments above the minimum go to the highest-APR balance first — Consumer Financial Protection Bureau. Checked September 25, 2026.
4. Regulation Z § 1026.54 – no interest on earlier cycles' balances or on grace-period balances repaid on time — Consumer Financial Protection Bureau. Checked October 25, 2026.
5. Regulation Z § 1026.55 – limits on raising APRs, including the 60-days-late rule — Consumer Financial Protection Bureau. Checked September 25, 2026.