Grace period. Annual fee. Do you know what the terms mean in regard to your credit card debt? It seems to be a different language. You need to know them to compare rates.

Understanding Meanings Of Credit Card Debt Terms Can Save You Money

Do you get the credit card bills and quickly put them away so they don't ruin your day? That's probably because you don't want to be reminded what you already know: You owe a lot of money. What should you do? Start reading. No, not a book. Read about your card.

After comparing quotes, you received your card and a description of the card agreement was sent, too, so you could understand what your obligation really meant. If you've never read it, you should. The same thing can be said about your monthly statement. Often what you don't know can hurt you. When you're talking about repaying hundreds or even thousands of dollars, you should know what the terms and conditions are so you understand what is expected of you and the credit card company. That information may emphasize why you need credit card debt consolidation.

The following information should make it easier to understand what the terms:

Annual fee: Once each year a fee is charged to the credit card holder. This is the cost charged by the company for maintaining the account. All companies have their own fee schedules. When considering which card is right for you, be sure to know how much you will have to pay for the privilege of being a customer. That may sound silly but that's really what is happening.

Annual percentage rate: Also known as APR, this is the percentage that represents the cost of the credit you are receiving. The percentage rate can be fixed, which means that despite market fluctuation of interest rates, the rate stays the same. Another type of rate is variable, meaning it goes up and down when market rates do.

Average daily balance: Most card companies use this to determine the amount of the monthly payment. It is calculated adding each day's total balance and then dividing the total by the amount of days in your billing cycle. The balance is then multiplied by the monthly periodic rate.

Balance transfer: When the debt in one credit card account is transferred to another, this is the fee charged to cover costs of the transaction.

Grace period: This is the amount of time the credit card company allows its customers to pay off the balance of the debt without having to pay finance charges. This amount of time usually is 25 to 30 days.

Introductory rate: Some card company will use this type of rate to attract new customers. While this rate typically is low, after a designated period of time the rate will increase to what is considered the customer's regular rate.

Minimum monthly payment: The least amount of money that a card customer can pay to keep the account current. That is, paying anything less than this means your account is delinquent. Some companies might even say the account has defaulted and decide to close the account. The minimum payment can range from 2 percent to 4 percent of the outstanding balance.

Monthly periodic rate: This is used to help determine the monthly payment. It is determined by dividing the annual percentage rate by 12.

Penalty charges: Sometimes customers are late making payments. When this happens, an additional fee is charged. It is a costly reminder to pay on time next time.

Prime rate: The interest rate that a financial institution can charge customers deemed the most credit worthy. Usually, that refers to companies because of the large amounts of money that are involved in their relationship. Many card customers' rates are based on the prime rate plus additional percentage points.

If you need to get another copy of the agreement regarding your account, ask the card company to send you one. Even easier is to print it from the company's Web site.

Make sure to read both sides of your monthly credit card statement. Sometimes there are important updates on one side and you always are responsible for knowing them.