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A

Annual fee

Some cards charge an annual fee and this if for the use of the credit card and is added to your monthly bill. These credit cards typically have some of the better rewards programs such as Aeroplan or Air Miles offered with them and you have to determine if you're going to use it enough (ie. spend enough) to gain the points necessary to make the annual fee worth it to you.

There are many no fee credit cards on the market as well.

Annual interest rate

This is the annual interest rate that is charged on your purchases that don't have any interest-free period. Keep in mind that there is no interest-free period for cash advances or balance transfers and the interest is charged from the day you take the cash out at the ATM or equivalent. This can get quite expensive!

B

Balance Transfer

Some credit card's offer a balance transfer deal to get you to sign up to the card. This is when you transfer an unpaid balance from one card to the new one and it's typically between different card issuers. The new card will typically start charging interest from the day you transfer the balance to the new card, so there's no interest-free period.

C

Cash advance

When you take out cash on your credit card subject to the daily limit and the credit limit on the card. Some cards charge higher interest rates on cash advances versus what you pay on your "normal" purchases, so beware of that. Once again, interest is charged from the day you take the money out so there is no interest-free period.

Convenience cheque

This is a cheque provided by your credit card company and is drawn against your account. You can use it in the same way as a personal cheque and it will be treated like a cash advance until you pay it back.

G

Grace period

The time from when you receive your statement and the payment due date and is set out by the credit card company. They usually are between 15 and 26 days and counts as part of the interest-free period.

I

Interest-free period

The interest-free period starts when you buy a good or service on your credit card and ends when the company starts charging you interest on those purchases. This inclues the grace period.

For example:

You buy an iPod on the 5th day of the month.

You receive your statement on the 20th day of the month = 15 days

Your payment is due on the 5th day of the next month = Grace period = 15 days (assuming a 30 day month for the purpose of this example)

Interest-free period = 15 days + 15 days = 30 days

If you don't pay the iPod off after this date, you would start accumulating interest on the purchase.

M

Minimum payment

The minimum amount you have to pay each month on your outstanding credit card balance to avoid paying a penalty.

P

Penalty interest rate

The interest rate that penalty charges are calculated (such as missing a minimum monthly payment). This only applies to charge cards.

Prime rate

The interest rate lenders charge their best customers and is based on the Bank of Canada's target for the overnight rate.

R

Reference rate

A base rate, such as the prime rate, that lenders use to calculate the variable interest rates on credit cards.

Reward program

Programs offered by credit card companies that provide rewards for using the card. As you spend money on the card you collect points, cash back or some other type of offer that can be exchanged for trips, cars, etc.

S

Security Deposit

The amount that a credit card company may ask you to deposit in order to get a secured credit card. These are sometimes used to build up your credit card history and are lower risk for the lender.