Glossary

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Glossary of Credit Card Terms

Sometimes it's impossible to avoid financial terms.

So, we explain the more common ones.

Account parameters - authorisation limits.

ACH (automated clearing house) - a centre for the automated clearing of payment transactions.

Additional card - a card issued to either a member of the primary cardholder's family or a staff member of a company to whom a primary card has been issued.

Additional cardholder - the cardholder who has the additional card when more than one card is issued to a family or a company member.

Adjusted balance - the account balance that remains after adjustment is made for payments and credits posted to your account during the billing cycle. This is the account balance you can be charged interest on. It is one of 3 ways to calculate your unpaid account balance.

Affinity card - a payment card which is issued on the basis that the card issuer makes a donation to a particular organisation (usually a charity) every time the card is used.

Air miles - a popular reward programme in which you earn a certain amount of air miles for every pound you spend with your credit card.

Annual Fee - a charge for the use of a credit card. It is paid to the card issuer and is billed directly once a year to your monthly statement.

Annual Percentage Rate (APR) - an interest rate designed to show you the total annual cost of getting credit. APR is calculated in a standard way so that you can compare the cost of using one card with another.

Applicant - you become an applicant when you complete and submit an application form for a credit card.

ATM (automated teller machine) - an automatic machine that dispenses cash and is activated by a card and a Personal Identity Number (PIN).

ATM authorisation - when your card is cleared for use at an ATM by your card issuer.

Authorised user - a person who has been permitted to use a credit card account.

Average daily balance - the credit card account balance that remains when each day's balance is added together and then divided by the total number of days in the billing cycle. This is the account balance you can be charged interest on. It is one of 3 ways to calculate your unpaid account balance.

Balance transfer - the process of moving your unpaid credit from an account with one credit card issuer to another. You can sometimes be given a financial incentive to transfer your unpaid credit.

Balance transfer fee - the fee you can be charged for transferring your unpaid credit from one credit card account to another.

Bank card - a credit card issued by a bank.

Bank proprietary card - a card issued by a bank with one or more service functions. It is issued by a particular bank and can only be used on that banking network.

Behavioural scoring - the process of checking whether current payment transactions contradict a previous spending pattern.

Billing cycle - the number of days between your previous and current statement date.

Billing statement - the monthly bill sent to you by your card issuer. It details your account transactions - purchases, payments, credits and fees.

Billing date - the date on which your billing statement is produced.

Bonafide cardholder - a cardholder of good financial standing.

Business conditions - the terms and conditions according to which you may use a credit card. These are decided by the card issuer.

Capture date - the date on which a transaction is recorded and processed.

Card authentication - card verification.

Card charges - the fees you pay. These could include annual fee, cash advance fee, exchange rate mark-up, item charge, joining fee and transaction fee, but vary according to the card issuer.

Card expiry - the date printed on the card after which the card must be renewed.

Card Protection - Card Protection protects you from fraudulent use of your cards should they be lost or stolen. See the provider's Terms & Conditions for further information.

Cardholder - a person to whom a card has been issued.

Cardholder agreement - the written statement providing the terms and conditions for using a credit card.

Cash advance - the procedure to obtain cash with a card.

Cashback - a customer incentive where a card issuer gives you a cash percentage of what you spend using your credit card.

Charge card - a payment card which requires the total bill to be paid by a specific date. Unlike a credit card, you cannot carry an account balance from one month to the next.

Charge-off - the removal of an account from an issuer's books. When an account is charged off, the issuer absorbs the outstanding balance as a loss. Charge-off is also referred to as write-off.

Classic card - the basic, general-purpose credit card usually with benefits. Also called a 'standard' card.

Co-branded card - a card issued jointly by a card issuer and a non-financial institution, bearing the brand/logo of both. The non-financial institution offers you certain benefits, often using a points system.

Co-signer - The second of two people who apply for a credit card. The first applicant is the primary cardholder and the second is the co-signer. The co-signer takes responsibility for account balances the primary cardholder does not pay.

Credit Agency - An agency that gathers and maintains information on the debts and repayment records of individuals and businesses. Credit agencies prepare reports that are used by credit card issuers to view an applicant's or cardholder's credit history.

Credit card - a plastic payment card which enables you to make purchases and to withdraw cash up to an agreed limit. The credit can be settled in full by the end of a specified period or can be settled in part. The balance is treated as extended credit and interest is charged on that amount. You are sometimes charged an annual fee.

Credit limit - the maximum amount of borrowing you may incur on your credit card.

Credit scoring - the process by which the credit worthiness is checked.

Debit card - a card linked to a bank or building society current account. It is used to pay for goods and services by immediately debiting your account, much like writing a cheque. No credit is extended to the cardholder.

Default - non-payment of an account according to the terms of the cardholder agreement. If you are declared in default, your account may be subject to higher interest rate charges.

Deferred payment - delayed payment.

Direct debit - a pre-authorised arrangement to automatically have your credit card bill paid directly from your bank account every month.

EFT (Electronic Funds Transfer) - an electronic movement of funds that eliminates the need for paper.

Exchange date - the date on which a foreign currency exchange rate is applied.

Exchange rate - the conversion rate when changing one currency to another.

Exchange rate mark-up - a credit card fee added to the exchange rate on transactions in foreign currencies. It can be calculated as a flat fee or as a percentage of the transaction amount.

Foreign currency charge - a credit card fee added to the exchange rate on transactions in foreign currencies. It can be calculated as a flat fee or as a percentage of the transaction amount.

Fraud - the misuse of a card or card data by a criminal cardholder or a third party.

Fraudulent application - an application where false information has been used to illegally obtain a card.

Free period - the interest-free (or "grace") period allowed between the date of purchase and the billing date, if you pay off your account on time and in full. The standard grace period is normally between 20-30 days.

General purpose card - a card which is issued to creditworthy persons for world-wide use to obtain a comprehensive range of goods/services at merchant locations and cash at bank locations/ATMs.

Gold credit card - a credit card that offers a higher line of credit and more services than a standard credit card.

Grace period - the interest-free period allowed between the transaction date and the billing date, if you pay off your account on time and in full. The standard grace period is normally between 20-30 days. Also known as 'interest-free period' or 'free period'.

High risk merchant - a merchant where cards are misused and counterfeit cards are used frequently.

Hot card - a card that has been put on a card organisation blacklist.

Household income - the total income of all members of a household. It is used by card issuers in evaluating applications for joint credit cards.

Interest free period - see "Free period".

Interest rate - the percentage to be paid by you on unpaid credit. Interest rates vary from issuer to issuer and also depend on when the credit is paid. A standard calculation of the total cost to you of borrowing money is presented as Annual Percentage Rate (APR) charge or Typical Annual Percentage Rate. You can use APR to compare the cost of various cards.

Interoperability - the possibility of using a card at Point-Of-Sale terminal and ATMs of another card system.

Introductory APR - the rate which describes the total cost of your credit card loan for the first year only. During this year you may pay lower charges than normal.

Introductory rate - introductory low interest rates used to attract cardholders. The rate normally applies to the first 6-12 months after receiving the credit card.

Issuer - a bank or other financial institution which issues cards, receives cardholder transactions from merchants, guarantees the payment and collects the respective amounts from the cardholders.

Joint credit - credit issued to a couple based on the assets, income and credit history of both people. Joint credit may result in a higher than normal credit limit and both parties are responsible for clearing the account.

No Terms.

Late payment fee - a fee charged for failing to submit the minimum monthly payment by its due date. The fee can be a flat rate fee or a percentage of the amount borrowed.

Lost and stolen report - a report you make to a card issuer detailing the loss or theft of your credit card.

Loyalty card - cards issued, typically by retailers, to earn rewards or discounts eg. Tesco, Clubcard.

Magnetic strip - a strip with a magnetic layer on the reverse side of a card, on which account details can be stored on magnetic tracks.

MasterCard International - an international payment systems organisation which is the licensor of MasterCard cards.

Merchant - a legal entity with which there is an agreement to accept cards as payment for goods or services when properly presented.

Minimum payment - the minimum amount you can pay to keep your account from going into default. Most issuers ask for a minimum payment of 2% of the amount owed.

Monthly statement - the billing statement sent to you once a month.

Network - the communications system of a card organisation.

Online access - the ability to access your credit card account via the Internet.

Payment brand - the brand of a particular credit card organisation.

Payment Protection insurance - a policy that covers credit card debt should the cardholder lose his job, die or become disabled. The cover normally refers to the debt that existed at the last billing cycle.

Penalty rate - a fee to you for making late payments as defined in your credit card agreement. This rate varies depending on the card issuer and can go into effect after a single late payment.

Periodic rate - the interest rate as it applies to a specific amount of time. The monthly periodic rate is the cost of credit per month, the daily periodic rate is the cost of credit per day.

Personal identification number (PIN) - a set of numbers used to verify your identity at a customer-activated terminal such as an ATM.

Platinum card - a credit card with a higher credit limit and more benefits than a standard credit card.

Point-Of -Sale (POS) transaction - a transaction which takes place at the point-of-sale.

Premium card - a card which is issued (often as a gold or platinum card) to those within a higher income bracket and which is provided with a high spending limit and additional features.

Previous balance - the amount owed at the end of the previous billing cycle. Some card Issuers base their charges on this amount.

Primary cardholder - the cardholder who has the primary card, when more than one card is issued to a family or a company.

Purchasing card - a payment card issued to businesses, companies or Government Departments to make supplier or trade agreements.

No Terms

Renewal process - the measures required for the renewal of your card which is due to expire.

Revolving line of credit - allows you to borrow a certain amount, to repay some or all of that amount, and then borrow the same amount again. Credit cards offer revolving credit. If you choose not to pay off the full amount borrowed you will be charged interest on the unpaid amount.

Reward programme - material benefit which can be accumulated with the use of your card. Rewards are often calculated as a percentage of what you spend using your card.

Secured card - a credit card which is guaranteed with a cash deposit to your card issuer. If you have had credit problems in the past, you can establish a good record using a secured card.

Smart card - payment cards that contain a computer chip embedded in the plastic. The chip, when read by certain computers, means the card can perform a number of functions. It can be used as a cash Withdrawal card or a credit card or as an identity card.

Standard card - the basic, general-purpose credit card usually with benefits. Also called a 'classic' card.

Standing order - A regular payment of a specified amount to a named payee, made by a bank on your instruction.

Store card - also known as retailer card. A plastic payment card limited in use to a specified retailer or group of retailers.

Teaser rate - an introductory low interest rate aimed at attracting cardholders.

Transaction - the purchase of goods or services or the withdrawal of a cash advance.

Transaction date - the date goods or services were purchased or the date a cash advance was withdrawn.

Travel insurance - a policy provided by your card issuer which covers your losses should you become ill or have an accident or accommodation problems when you go abroad.

Typical Annual Percentage Rate (APR) - the interest rate that 66% of customers applying for that card can expect to get from the credit card provider. Typical APR is calculated in a standard way so that you can compare the cost of using ine card with another.

No Terms

Value-added service - additional services linked to a card to enhance its value.

Visa International - an international payment systems organisation which is the licensor of Visa cards.

Write-off - the removal of an account from an issuer's books. When an account is written off, the issuer absorbs the outstanding balance as a loss. This is also referred to as a "charge-off".

No Terms