Congratulations! You just received your very first credit card and are eager to try it out by charging a purchase at your local mall. Before you run off and shop, stop for a while and ask yourself if you understand all the financial terms you need to be familiar with.

The first acronym you should familiarize yourself with is APR. APR is short for Annual Percentage Rate, and this represents the cost of credit for a year. It is the "interest rate" that the card company will add on to any of your unpaid balances to come up with the appropriate finance charge for a specific billing cycle. You should have been aware of the APR of your card before you signed up. In some cards, the APR can change, but in some, the APR remains the same, irregardless if general interest rates and/or economic indicators change.

The time given to you from when you receive your card to its due date is called the card’s "free period". If you pay within that grace period, your purchases will not be subject to any finance charge (based on your APR). Without the free period, you will be given a finance charge every time you use your card from the date of each transaction until it is posted which is unfair. If your card has a free period, you should receive your bill at least 14 days before it is due.

Another term you must be familiar with and be consciously aware of is "Annual Fee". This can be likened to a membership or participation fee. Usually, as an incentive or reward for new clients, the bank waives the fee for the first year. At the end of 12 months, you will see this reflected on your billing statement. The annual fee card companies charge will depend on the card that you hold. The fee for standard cards is less than the fee for gold or platinum cards (have higher credit limits and have more consumer benefits).

Now that you are aware of some of the basic jargon used by credit card companies, you will no longer be confused when your first bill arrives and would somehow, understand how your credit card works.

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