Credit Cards Credit Cards 101 7 Basic Credit Card Features An Explanation of Seven Basic Credit Card Features By LaToya Irby LaToya Irby Facebook Twitter LaToya Irby is a credit expert who has been covering credit and debt management for The Balance for more than a dozen years. She's been quoted in USA Today, The Chicago Tribune, and the Associated Press, and her work has been cited in several books. learn about our editorial policies Updated on January 20, 2022 Reviewed by Samantha Silberstein Reviewed by Samantha Silberstein Twitter Samantha Silberstein is a Certified Financial Planner, FINRA Series 7 and 63 licensed holder, State of California Life, Accident, and Health Insurance Licensed Agent, and CFA. She spends her days working with hundreds of employees from non-profit and higher education organizations on their personal financial plans. learn about our financial review board In This Article View All In This Article Credit Card Types Credit Limit Balance APR Grace Period Rewards and Perks Credit Card Fees Photo: Marko Geber / Getty Images Credit cards differ in the terms they offer, but most of them have the same basic features. Understanding these basic credit card features makes it easier to choose the right one and use it wisely. Credit Card Types Not all credit cards are created equal. There are several types of credit cards, and a single credit card issuer may issue any or all of them, sometimes even multiple versions of the same type of credit card. Here are just a few of the most well-known types: A standard credit card has no extra perks or benefits but may offer a low-interest rate to attract customers. A balance transfer credit card offers an introductory balance transfer interest rate and sometimes a low fee on balance transfers. A rewards credit card pays rewards on the purchases you make. A premium credit card has lots of perks and benefits, such as concierge services, usually for a higher annual fee. A retail credit card is associated with a specific store and offers rewards or discounts on your purchases with that store. Co-branded versions of retail credit cards have a Visa, MasterCard, or American Express logo and can be used anywhere. A secured credit card requires you to make a security deposit against the credit limit and is easier to be approved for when you have bad credit. A charge card requires you to pay your full balance each month instead of making minimum monthly payments. Credit Limit Most credit cards have a credit limit, which represents the maximum balance you can have on the credit card at a point in time. The maximum balance includes purchases, balance transfers, cash advances, finance charges, and fees. When you exceed your credit limit, your creditor may charge an over-the-limit fee or raise your interest rate. Note Some credit cards don't have a preset spending limit but instead allow you to spend an amount the credit card issuer believes you can pay off based on a few factors like your income, credit history, and spending factors. The spending limit isn't set in stone and can change from month to month, based on your purchasing and payment habits. Balance The balance on your credit card at any given time is the total amount you owe, including purchases, finance charges, and fees. The higher your credit card balance, the lower the available credit you have remaining for making additional purchases. Higher balances raise your credit utilization and lower your credit score. Note You can check your current credit card balance online or by calling your credit card customer service via the number on the back of your credit card. APR The annual percentage rate (APR) is the interest rate applied to any balance you carry past the grace period. Credit cards can have different APRs for different types of balances, such as balance transfers or purchases. Balance transfers and cash advances often have higher APRs than purchases. APRs can be fixed or variable. A fixed APR can change, but the creditor must inform you in writing before changing the rate. A variable APR changes from time to time based on changes to the underlying index rate. Grace Period The grace period is the amount of time you have to pay your balance in full before a finance charge is applied. If you carried a balance from the previous month, you might not have a grace period for your new purchases. Balance transfers and cash advances typically do not have grace periods. To find out the length of the grace period, refer to the credit card application or your credit card agreement. Your monthly statements should also include the number of days in the grace period. Note When a balance doesn't have a grace period, interest begins accruing right away. Rewards and Perks Some credit cards offer rewards in several different forms, such as cash back, miles, or points to redeem, and discounts on future purchases. You can earn rewards on some or all of your purchases, and then you can redeem them once you've accumulated a certain amount, depending on the rewards program. Perks vary by credit card and may include things like travel and trip cancellation insurance, rental car insurance, extended warranty, or purchase and price protection. Credit Card Fees You may occasionally be hit with credit card fees, usually based on a certain type of transaction or as a penalty. The most common credit card fees include the annual fee, finance charge, late fee, and over-the-limit fee. Some fees can be avoided simply based on how you use your credit card. For example, you can avoid paying a late fee by making your credit card payment on time each month. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. American Express. "Understanding Different Types of Credit Cards." Visa. "Company Branded and Co-Branded Credit Cards." American Express. "Understanding the Differences Between Charge and Credit Cards." Bank of America. "Credit Card Glossary." myFICO. "What is Amounts Owed?" Consumer Financial Protection Bureau. "What is a Credit Card Interest Rate? What Does APR Mean?"