Basic Credit Card Terms, Explained

Understanding credit card statements and terms is frustrating, to say the least. Credit card wording is confusing and filled with legal jargon. Let us help. Below are a few credit card terms, broken down to help you understand your statements and finances better.

APR (or interest rate) is the annual percentage rate of interest you are charged on your credit card.

Standard rate
A standard rate is an interest rate that does not change, for the most part. Contrary to popular belief, a lender/issuer has the legal right to change the standard rate at any time. In such cases, issuers are required by law to send a 15 days’ notice regarding the rate change.

Variable rate
Unlike a standard rate, a variable rate does what its name states – it varies.  Most credit cards base their variable on an index (i.e. prime rate).

Tip: Always shop around for the best interest rates, like those offered at a local credit union. We currently offer a ILWU Credit Union Visa Platinum credit card with a 9.95% APR standard rate and a 2.5% rebate

Prime rate
A prime rate is the model rate used by financial institutions. The APR on a credit card may be the prime plus 10%. Currently, the U.S. prime rate stands at 3.25%. So, 3.25% plus 10% gives you a credit card APR of 13.25%.

Grace period
This is the time between the statement date and your payment-due date. It is during this time that you want to pay the statement in full to avoid being charged interest. However, many credit card companies now have a grace period down to less than 20 days. Check the back of your credit card statement or call your credit card company to get the exact length of your credit card’s grace period. FYI: The grace period for a ILWUCU Visa Platinum credit card is 21 days.

Now that you’ve read our definitions above, will you be more comfortable reading your credit card bills? Let us know. We want to hear from you.

About the Author

Alejandra Gutierrez Alex is the new Social Media Specialist for the ILWU Credit Union. She's a 'nerd' at heart who enjoys community building. Her obsessions: baked goods and old mariachi ballads.