What if a few clear definitions could change how someone uses their everyday plastic and save them real money?
This short Canadian glossary gives plain information so readers can spot key phrases fast. It shows how balances form from purchases, fees and transfers, and why knowing APRs and interest helps estimate the amount paid over time.
Readers learn how variable and promotional rates work, and how daily periodic rates apply interest based on the balance. It also explains cash access, balance transfers and common protections like zero liability.
The guide points to useful actions, such as tracking statement dates and filing disputes with national bureaus like Equifax Canada and TransUnion.
How to use this credit card glossary for smarter decisions
Knowing a few key definitions makes everyday financial choices clearer and less costly. Readers can use the glossary as a quick reference to turn jargon into immediate steps.
Find terms fast, then explore related entries
Start by scanning the alphabetical list to pinpoint a definition. Then follow cross-references to see how entries link together.
- Spot essentials that affect the bottom line: balance, APR types, fees and dates.
- Match rewards with spending and note introductory rates before you use card features.
- Organize reminders around billing cycle, statement closing date and due date to avoid late charges.
What applies broadly in Canada right now
Statements list balances, transactions, due dates and minimum payments. Interest typically accrues daily on unpaid balances using the periodic rate from APR.
Zero liability policies generally protect holders against fraudulent charges once they are reported. While issuers differ, these core mechanics are common across most credit cards in Canada.
Main takeaway: Use the glossary to compare features quickly and act on the items that affect cost and protection.
| Check | Why it matters | Action |
|---|---|---|
| Statement balance | Determines interest and payoff amount | Pay full or track residual interest |
| Key dates | Billing cycle, closing and due dates affect grace period | Set reminders for the statement date and due date |
| Protections | Fraud policies like zero liability limit losses | Report unfamiliar charges promptly |
Credit card terms
A short list of key words can turn a confusing statement into useful, actionable information.
This section defines the vocabulary most often found on monthly statements and in issuer agreements across Canada. It covers balances and what makes them up, APR variants, common fees, and how interest accrues when an amount remains unpaid.
- Balance, statement balance and residual amount affect how interest is charged.
- APR types include purchase, cash-advance, balance transfer and penalty rates.
- Billing cycle, statement closing date and due date determine payment timing.
- Fees range from annual and balance-transfer fees to late fees and finance charges.
- Credit limit, available credit and utilisation show access and risk to a profile.
- Rewards language explains cash back, points and redemption rules.
| Term | What it means | Why it matters | Action |
|---|---|---|---|
| Statement balance | Total shown at closing date | Determines payoff to avoid interest | Pay in full or track residual interest |
| APR types | Different rates for purchases, advances, transfers | Costs vary by transaction type | Match use to the lowest available rate |
| Credit limit & utilisation | Maximum borrowing and ratio used | Impacts available amount and score | Keep utilisation low to protect a profile |
| Protections | Dispute, chargeback, zero liability | Limits losses from fraud | Report issues promptly and follow issuer steps |
Interest and APR essentials
Clear rules about rates and daily interest let a holder estimate true borrowing costs. This section explains the common APR types, how daily interest is calculated and what introductory offers mean in practice.
Annual Percentage Rate (APR)
APR is the yearly interest rate applied to unpaid balances. Issuers set separate APRs for different uses, so the overall cost depends on how the account is used.
Purchase APR
Purchase APR applies to everyday spending and often comes with a grace period if the previous statement is paid in full by the due date. That makes carrying no balance the cheapest option.
Cash-advance APR
Cash-advance APR is usually higher and starts accruing interest immediately with no grace period. Cash withdrawals are generally the most expensive form of borrowing on a card.
Balance transfer APR
Balance transfer APR can be promotional for a set time or a standard ongoing rate. Moving an existing balance may lower interest for several months, but fees and the post‑promo rate matter.
Penalty APR
Penalty APR is a much higher rate that can follow late payments. Recovering a lower rate typically requires a history of on‑time payments per issuer rules.
Variable APR versus fixed APR
Variable APRs track an index such as the prime rate and can change. Fixed APRs do not track an index but can still be adjusted with notice.
Zero per cent APR and introductory rate
Introductory offers such as 0% APR give temporary relief on purchases or balance transfer. Check the promo length, qualifying transactions and the regular rate that applies after the promo ends.
Periodic rate and how interest is calculated daily
The periodic rate converts APR into a daily rate (APR ÷ 365). Interest usually equals the periodic rate multiplied by the daily balance, which compounds as new charges and interest add up.
- Tip: Paying earlier in the billing period cuts daily interest and can save money over a month or year.
| APR type | Typical use | Key risk |
|---|---|---|
| Purchase APR | Everyday spending | Interest after grace period |
| Balance transfer APR | Move existing debt | Promo expires, transfer fees |
| Cash-advance APR | Cash withdrawals | No grace, higher rate |
Balances, transfers and utilisation
Seeing the full picture of running balances, transfers and utilisation helps readers plan payments that save money.
Balance and statement balance
The current balance is the running total owed and includes purchases, interest, fees and transfers. The statement balance is the amount due for the last cycle.
Paying the statement balance by the due date preserves a grace period on new purchases and avoids most interest charges.
Balance transfer and why people do it
Balance transfers move debt to another account, often to a lower or promotional APR. They can cut costs but usually carry a transfer fee and may exclude transfers within the same issuer.
Residual interest and payoff amount
Residual interest accrues between statement issuance and payment. Calling to request a payoff amount helps remove trailing cents and stops surprise interest from appearing after a payment.
Credit utilisation rate (ratio)
The utilisation ratio equals the balance divided by the credit limit. Keeping utilisation well below 30% across accounts supports a healthy profile.
- Pay earlier or make multiple payments to lower average daily balance and reduce interest.
- When evaluating a balance transfer, compare the fee, promo length and go‑to rate to estimate true savings.
| Item | Why it matters | Action |
|---|---|---|
| Current balance | Shows running amount owed | Track during cycle |
| Balance transfer | Can lower interest | Compare fee and promo |
| Utilisation | Affects score | Keep below 30% |
Payments, dates and cycles
Small changes to payment timing can cut months from a repayment plan and save interest. This section explains how cycles and key dates shape when transactions appear and when charges begin to accrue.
Billing cycle and statement closing date
The billing cycle spans from one statement closing date to the next. Transactions within that window appear on the same statement and affect the period’s balance.
Due date and grace period
Paying the full statement balance by the due date usually preserves a grace period on new purchases. Missing the date can cause interest to start on new transactions.
Minimum payment and how it’s set
The minimum payment is often the greater of a flat floor or a percentage of the balance. Relying only on the minimum extends repayment time and raises total interest paid.
Late fee and late payment implications
Late payments can trigger fees and may affect eligibility for promotional rates or lead to a higher APR. Setting alerts or using automatic payments lowers this risk.
- Tip: Schedule a payment between closing and due dates to reduce daily interest.
| Item | What it controls | Practical action |
|---|---|---|
| Billing cycle | Which charges appear on a statement | Plan large purchases after the closing date |
| Due date | When payment must arrive to keep grace | Set calendar reminders or auto-pay |
| Minimum payment | Least amount required monthly | Pay more where possible to cut interest |
Fees you may encounter
Fees can quietly erode value, so spotting them early helps keep costs low. This brief guide explains common charges and how they affect the amount owed each cycle.
Annual fee
Annual fees are the yearly cost for premium benefits. Some issuers waive the first year. Check whether perks justify ongoing charges before renewing.
Balance transfer fee
Balance transfers often carry a fee of about 3%–5% of the transfer. That fee reduces net savings from a promotional rate. Use a calculator to compare the fee against interest saved during the promo.
Cash-advance fee
A cash advance usually incurs a fee (for example, 5% or $10, whichever is greater) plus a higher APR and no grace period. Withdrawals can become expensive quickly.
Over-limit fee and how it can occur
Spending past the limit may trigger an over‑limit fee. Setting alerts and monitoring available credit helps avoid this charge and potential declines.
Finance charges
Finance charges include interest plus any applicable fees shown on the statement. If a fee posts in error, contact the issuer promptly with statement details.
- Tip: Review the fee schedule before a major payment, transfer or cash withdrawal.
| Fee type | Typical amount | Main impact | What to do |
|---|---|---|---|
| Annual fee | $0–$499 | Yearly holding cost | Weigh benefits vs cost |
| Balance transfer fee | 3%–5% of transfer | Reduces promo savings | Calculate net savings |
| Cash-advance fee | 5% or $10 min | Higher borrowing cost | Avoid cash withdrawals |
| Over-limit fee | Varies by issuer | Unexpected penalty | Set alerts, stay below limit |
Limits, available credit and cash access
Limits set by issuers shape how much a person can spend and how they access cash in an emergency.
Credit limit and available credit
The credit limit is the maximum amount an issuer allows on the account. Available credit is what remains after posted transactions and pending holds.
Available funds fluctuate as purchases post and payments arrive. Staying well below the limit preserves flexibility and supports a healthier utilisation ratio.
Cash advance and cash access limits
Issuers often set a separate cash access cap that is smaller than the overall ceiling.
Cash advances usually incur a fee and a higher APR that begins immediately. For most people, withdrawing cash this way should be reserved for urgent needs only.
Principal versus total balance amount
Principal is the original amount borrowed for purchases or advances. The total balance includes the principal plus interest and any fees added to the account.
Paying down principal first reduces future interest costs and lowers the total amount owed over time.
- Monitor the account during the cycle to avoid pending authorizations pushing spending past available credit.
- Compare lower‑cost options before choosing a cash withdrawal on the account.
| Item | What it controls | Practical action |
|---|---|---|
| Credit limit | Maximum allowed | Plan large purchases after the statement closes |
| Cash access limit | How much cash can be withdrawn | Use only for emergencies and factor in fees |
| Total balance | Principal + interest + fees | Pay principal faster to cut interest |
Prime rate and variable APR explained for Canadians
Changes to the prime rate can quickly alter the cost of carrying a balance for many Canadians.
Variable APRs are commonly set as the prime rate plus a margin. When prime rises, the variable rate usually rises too. When it falls, the rate may drop and lower interest charges.
Fixed APRs do not track the prime rate daily, but issuers may still change them with notice. Disclosures at approval and in any change‑in‑terms notice explain how a specific rate is calculated.
- Most issuers publish how they set a rate (prime + margin tied to the applicant’s profile).
- Higher prime means higher borrowing cost over time; a lower prime reduces that cost.
- To reduce exposure, pay more than the minimum, pay earlier in the cycle, or consider a promotional consolidation offer when appropriate.
| Item | What it means | Practical action |
|---|---|---|
| Prime rate | Benchmark used by lenders | Watch Bank of Canada announcements |
| Variable APR | Prime + issuer margin | Check disclosure and recalc payments when it changes |
| Fixed APR | Not tied to prime daily | Read notices; contact issuer about changes |
Your credit profile: reports, scores and history
A clear view of your file helps lenders judge risk and shows where to improve.
Credit report and what’s in it
A credit report lists open and closed revolving and instalment accounts. It shows dates opened, balances, limits and recent activity that lenders read when assessing an application.
Checking this report helps spot errors and unexpected listings before they affect decisions.
Credit score ranges and why they matter
A three‑digit score summarizes the report into a single gauge of risk. Higher scores help secure better offers and higher limits.
Scores usually range across bands from poor to excellent, and lenders map them to pricing and approval rules.
Credit history and payment history
History shows how long accounts have been open and whether payments arrive on time. Payment history is one of the most important factors when a lender evaluates an account.
On‑time payments and low utilisation improve standing. Late payments can affect the record for years.
Credit bureaus and how they use your information
In Canada, major credit bureaus compile data supplied by lenders and furnish reports and scores to applicants and creditors.
Consumers can request their report, check for inaccuracies, and follow bureau dispute steps to correct errors that might harm a score.
- Tip: Review reports regularly and keep balances low relative to limits.
- Tip: Limit hard inquiries and keep older accounts open when possible.
| Item | What it shows | Practical action |
|---|---|---|
| Report contents | Accounts, balances, dates, enquiries | Review annually and dispute errors |
| Score | Three‑digit risk indicator | Pay on time and lower utilisation |
| History | Length and payment patterns | Maintain older accounts and avoid missed payments |
Statements and account housekeeping
Monthly statements act as a concise audit of activity, making it simple to spot charges and plan payments.
Statement details and how to read them
A statement summarises the billing cycle and lists transactions, fees, the statement balance, minimum payment due and the payment due date.
It also shows finance charges and any changes the issuer posts. Paying the statement balance in full by the due date preserves the grace period and avoids most interest.
Available information and key dates to watch
The statement closing date marks the end of the cycle and determines which purchases appear this period.
Review alerts on the statement for rate changes or new fees. Downloading statements and keeping organized records helps track spending over time.
- Check transactions quickly to spot unfamiliar activity and start a dispute if needed.
- Set notifications tied to the closing date and due date to reduce missed payments.
- Use the statement’s breakdown to compare finance charges and plan lower‑cost actions next time.
| Item | What it shows | Action |
|---|---|---|
| Statement balance | Amount due for the period | Pay in full to keep grace |
| Minimum payment | Least required this cycle | Pay more to reduce interest |
| Closing date | Defines the billing cycle window | Plan purchases after this date |
Cardholders and access
Knowing who can use an account helps prevent surprises and protects a household’s finances.
Account holder versus authorized user
The account holder is legally responsible for payments and for how the account shows on a credit report. Adding authorised users lets others spend on the same line, but it does not transfer liability.
Authorized users often get their own cards linked to the account. Clear rules about spending and repayment help avoid conflict and unexpected balances.
PIN and EMV chip
EMV chips plus a PIN add strong in‑person authentication by creating dynamic transaction data. This reduces fraud versus magstripe only methods.
- Keep PINs private and change them if there is any suspicion of compromise.
- Review access settings like contactless limits and cash access to balance security and convenience.
- Report lost or stolen cards immediately; issuers typically apply zero liability for unauthorized transactions when notified promptly.
| Role | Liability | Credit impact |
|---|---|---|
| Account holder | Full legal responsibility | Shows on their report |
| Authorized user | No payment obligation | May build history if reported |
| PIN holder | Controls cash & payments | Activity posts to same account |
Card types and qualification
Understanding product differences helps someone pick an option that fits their needs. This section outlines secured, unsecured and prepaid choices, plus what pre‑approval means in practice.
Secured option
Secured products require a refundable deposit that usually sets the initial credit limit. They help people build or rebuild a profile when approval for unsecured offers is unlikely.
Unsecured option
Unsecured offers do not need a deposit and depend on credit history, income and the applicant’s profile. They often provide higher limits and richer rewards for qualified applicants.
Prepaid product
Prepaid items are stored‑value instruments loaded in advance. They do not involve borrowing and do not affect a credit file.
Pre‑approval versus approval
Pre‑approval signals likely eligibility based on soft checks. Final approval follows a full application and underwriting, which reviews identity, income and account history.
- Tip: Compare fees, rates and benefits before applying.
- Responsible use of a secured product can lead to an upgrade to an unsecured option over time.
- Read disclosures carefully to know deposit requirements, fees and paths to a higher limit.
| Type | Deposit | Impact on file | Best for |
|---|---|---|---|
| Secured | Yes; refundable | Reported; builds history | Rebuilding or new applicants |
| Unsecured | No | Reported; higher limits possible | Established profiles with income |
| Prepaid | No; prepaid funds | Not reported as borrowing | Budgeting or limited spending |
Rewards, points and cash back
Rewards can turn routine purchases into measurable value when the program fits spending habits.
Rewards program basics
Most programs pay a percentage of each purchase as points, miles or cash back. Earnings are usually shown as a percent of the transaction amount and pile up over time.
Cash back rewards
Cash back is simple: many programs treat $1 of reward value as $1 in redemption. It often redeems as a statement credit, deposit or cheque, which makes tracking value straightforward.
Travel rewards, miles and points
Travel rewards arrive as points or miles and redeem through issuer portals or partners. Redemption value can vary by route, partner transfer and the time of booking.
- Category bonuses and caps affect effective earn rates.
- Coordinate large purchases with statement timing to maximise bonuses.
- Watch limited‑time promotions to accelerate accumulation.
- Weigh any annual fee against expected returns.
| Reward type | Typical redemption | Best for |
|---|---|---|
| Cash back | Statement credit or deposit | Simple value and flexibility |
| Points / miles | Flights, hotels, transfers | Travel flexibility; variable value |
| Category bonuses | Higher earn rate for select spends | Household or business with targeted purchases |
Disputes, fraud and protections
A quick check of recent activity can stop fraud before it grows into a larger problem.
Dispute and chargeback
If an unfamiliar or incorrect entry appears, contact the issuer right away to start a dispute. They will investigate and may issue a temporary credit while reviewing the transaction.
A chargeback is a reversal the issuer requests from the merchant when evidence shows the merchant is liable. That process can return funds to the account holder if the claim succeeds.
Fraud, unauthorized transaction and zero liability policy
Zero liability policies generally protect users from fraudulent transactions once they report the activity promptly.
- Set real‑time alerts for new purchases to shorten the window for misuse.
- Keep dates and notes of every call or message when submitting evidence.
- Review each statement to spot recurring or unknown charges quickly.
- Replace a compromised card immediately and update only trusted merchants with the new number.
| Action | What happens | Why it matters | Best practice |
|---|---|---|---|
| Initiate dispute | Issuer investigates | May secure temporary credit | Contact issuer within days of discovery |
| Chargeback | Funds reversed from merchant | Recovers wrongful payments | Provide receipts and dates as evidence |
| Report fraud | Zero liability may apply | Limits holder liability for losses | Set alerts and replace compromised cards |
Interest rates versus fees: how costs add up over time
Small ongoing costs often hide in both the posted rate and routine fees, and they can turn a manageable balance into a long-term expense.
Interest rates on purchases, advances and transfers
Accounts usually carry separate APRs for purchases, cash advances and balance transfers. The daily periodic rate is derived from the APR and determines how much interest accrues each day in the billing period.
Carrying a balance means paying the applicable rate for the transaction type. If the APR rises, the same amount costs more over time.
How fees can increase your account amount
Fees such as annual, late and transfer fees post to the account and become part of the amount that earns interest if unpaid. Small recurring fees can compound when combined with daily interest.
Plan payments to hit larger posted items first and pay earlier in the cycle to reduce average daily balance and overall interest expense.
- Pay more than the minimum to cut interest quickly.
- Compare transfer fees against promo rates before deciding.
- Track both fees and rates to budget accurately over time.
| Cost type | Typical impact | Practical action |
|---|---|---|
| Purchase interest | Accrues after grace if balance unpaid | Pay statement in full to avoid |
| Advance interest | Starts immediately; higher rate | Avoid cash advances where possible |
| Fees (annual, late, transfer) | Add to amount and accrue interest | Minimise fees; dispute errors quickly |
Managing debt risks and credit damage
A single missed payment can start a chain of actions that raise borrowing costs fast. Acting early lowers the chance of long-term harm.
Penalty APR triggers and how to avoid them
Penalty APR rates are high and often apply after missed or late payments. Once added, a penalty apr may stay for months and boost interest sharply.
To avoid this, set up automatic payments at least for the minimum and add calendar reminders for the full amount due.
Charge-off and collections impact
A charge‑off happens when an issuer writes an account as a loss. The debt still exists and may move to collections, which harms a credit report and lowers a credit score.
Collections and defaults can remain visible for years. Contacting the issuer or a debt adviser early can reduce escalation.
Bankruptcy and long-term effects
Bankruptcy can discharge or restructure debts but carries long-term consequences for credit history and access to new products. It should be a last resort.
Rebuilding takes sustained on‑time payments, balanced use of available limits, and patience over time.
| Event | Immediate effect | Practical step |
|---|---|---|
| Penalty APR | Higher interest rate | Set auto‑pay; avoid late payments |
| Charge‑off | Account closed; sent to collections | Negotiate payoff; get written agreement |
| Bankruptcy | Debts discharged or restructured | Seek licensed counsel; plan rebuild |
Zero per cent APR and introductory offers
Promotional APRs create a short, interest-free runway when the math and timing line up. Introductory APRs can be 0% for a defined period on purchases, balance transfers, or both.
Key points to watch:
- 0% offers give a window to pay down balances without interest on eligible transactions for the promo period.
- Balance transfers often carry a fee; compare that cost to interest saved before moving a balance.
- Track the exact month the promotion ends to avoid surprise interest at the go‑to rate, which may be variable and tied to the prime rate.
- New purchases may be excluded from promo pricing; confirm which transactions qualify and how payments are applied.
- Planning equal monthly payments to retire the balance before the end of the period helps ensure advertised savings materialize.
For practical guidance on introductory offers and calculations, see a concise zero‑percent intro APR guide. After the promo, the standard APR usually applies and may change with the prime rate, affecting future borrowing costs.
| Feature | What to check | Action |
|---|---|---|
| Promo length | Number of months | Set a payoff schedule |
| Transfer fee | 3%–5% typical | Calculate net savings |
| Post‑promo rate | Variable or fixed | Plan for higher payments if rate rises |
Put these definitions to work and make confident choices today
Turn this glossary into simple habits that protect finances and cut costs on credit cards.
Paying at least the statement balance by the due date preserves the grace period. Paying only the minimum payment extends repayment and increases interest, so pay more when possible.
Track the credit card balance through the month and schedule a payment before the statement date to lower average daily interest. Keep the card balance well below the limit to protect available funds and the score.
Review a credit report from Canadian bureaus periodically to spot errors. Consider a balance transfer with a clear payoff plan—the net savings will depend on the transfer fee and the rate after the promo ends.
Set calendar reminders for due dates and promo end dates, build an emergency cash cushion, and review statements each month. Small, steady actions may also keep amount money owed manageable over time.
