Glossary of Credit Card Terms

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An alternate name for American Express.

Annual Fee
A fee paid once a year for the benefits that come with a credit card.

Annual Percentage Rate (APR)
The interest rate charged on purchases if the card’s full balance isn’t paid off each month.

An amount in excess especially on the credit side of an account.

Balance Transfer
The Transfer of a credit card balance to another credit card.

Balance Transfer Card
A card which offers inexpensive transfers from an existing credit card balance.

Balance Transfer Fee
the fee for transferring a balance from one credit card to another.

A catch-all term for the advantages of having a particular credit card.

Billing Cycle
The billing cycle for a credit card is the period of time between the account billings.

Business Days
Find out from your institution what days it counts as business days under the Truth in Lending and Electronic Fund Transfer Acts. Usually five days.

Cash Advance
A service that lets cardholders withdraw cash at an ATM or at a bank. It often includes a fee or high interest rates.

Cash Back
The money given back to a credit card user as a reward for using the card.

Chip and PIN
Cards containing a small microchip and require users to type a PIN to complete a transaction.

Property used as security for the repayment of a loan

A joint signer of a promissory note.

Credit Bureau
One of several companies that track of your credit history and use it to calculate your credit score.

Credit Card
A card authorizing purchases on credit.

Credit History
A person’s record of how you have borrowed and repaid debts.

Credit Limit
The maximum amount that a financial institution will extend to a client through a line of credit.

Credit Range
A segment of credit scores between two credit scores.

Credit Ratio
Credit ratio (or debt-to-income ratio) is the percentage of your income taken up by your debt. A high credit ratio is usally harmful because it means you can’t easily take on more debt. Lenders use this to measure the risk of extending someone credit.

Credit Scoring
A system that is used to rate credit applicants.

Credit Scoring System
A system that rates credit applicants according to various characteristics relevant to credit worthiness.

A person to whom money is owed.

A person’s ability to repay past and future debts.

Debit Card
A card that deducts money from a your checking account when you buy something. (unlike a credit card which bills you later). You can also use them at ATMs.

Debt-To-Income Ratio
Debt-to-income ratio (or “credit ratio”) is the percentage of your income taken up by your debt. A ratio greater than 35% can keep you from getting approved for a credit card because it suggests you will struggle to pay off your debts.

Failure to meet the terms of your credit agreement by not repaying your loan.

Failure by the customer to not make their payments on time. Such action can result in collection and lawsuits.

Dining Card
A credit card that rewards you for dining at restaurants. Common rewards are cashback, airline tickets, and access to exclusive events

Electronic Fund Transfer
Technology that is used to transfer funds electronically rather than by a check.

Emergency Fund
Savings reserved strictly for emergencies like losing your job or unexpected medical bills.

Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders to loan without discrimination based on race, color, religion, national origin, sex, marital status or income from public assistance programs. Lenders are able to discriminate against credit risks that are known not to pay their bills.

The value of a property or of an interest in it in excess of claims against it

Everyday Cash Back
“Cashback” is perk of some rewards cards which gives you back a percent of the money you spend on the card for certain things. “Everyday Cash Back” is the percent you get back for ANY purchase you make.

FICO Score
A person’s credit score calculated with software from Fair Isaac Corporation (FICO).

Finance Charges
Any fee representing the cost of credit or the cost of borrowing. It is interest accrued on, and fees charged for, some forms of credit.

Financial Institution
A general term to refer to banks and credit unions.

Foreign Transaction Fee
Fees for credit card transactions made in foreign countries.

Global Entry
A program of the U.S. Customs and Border Protection service that allows pre-approved, low-risk travelers to receive expedited clearance upon arrival into the United States.

Grace Period
The period between the end of your billing cycle (i.e. the "statement date") and the day your payment is due—typically lasting three weeks, during which the card issuer will not charge you interest on your purchases made during the last billing cycle.

Household Income
The total income of all members of a household. Credit card issuers often use this to evaluate joint credit applications.

A charge for borrowed money that is generally a percentage of the amount borrowed.

Introductory APR
A period of time after opening a credit cared that the issuer will charge a low interest rate.

Introductory Offer
The incentive for opening a card which usually takes place for the first few months or longer.

Introductory Period
A length of time immediately after opening a card when issuers extend special offers to new users.

The financial institution which issues a credit card.

Joint Account
A credit account that is held by two or more people. Both parties use this account and both are held responsible to repay.

Late Fee
A fee that is added to your credit card statement for failure to pay your bill after the due date.

Late Payment
A credit card payment made after the card statement’s due date. Making a late payment often reults in having to pay a late fee.

MasterCard is a company which handles credit and debit card transactions. They process the communication between merchants and financial institutions (banks and credit unions). MasterCard is not a lender and does not extend credit to people.

Minimum Payment
The minimum payment is the lowest amount of money that you are required to pay on your credit card statement each month.

Net Effective Income (Net Income)
A person’s gross income minus federal income tax.

NFC stands for “Near-field communication”. It is a technology that allows electronic devices to communicate wirelessly. Apple and Android devices use it when making payment at the register.

No Credit
An unestablished credit score.

The small benefits a credit card offers. Usually not in the form of cash.

The form of credit card reward currency earned from purchases that can be used on provided rewards from the credit card company.

Being “pre-approved” is an invitation to apply for a card. It is not the same as being approved. Card issuers use soft credit pulls to identify people with certain credit profiles. “Pre-approvals” are sent to people likely to be approved for a certain card.

Prime Credit
The credit range just below “super prime”. Typically defined as 680 – 739. Also referred to as “Good” credit.

Prime rate
The interest rate a bank charges to its best or “prime” customers. Each bank will quote a prime lending rate. The rate given to consumers on their credit cards is often based on the prime rate plus a certain percentage, which represents the lender’s assessment of the risk in lending, plus its profit margin.

Regular APR
Regular Annual Percentage Rate (APR) is the interest rate charged on purchases if the card’s full balance isn’t paid off each month.

Revolving debt
A continuous debt that is also known as a balance.

Rewards Card
A card that gives rewards like plane tickets or cash back for using it.

Rotating Categories
Cards with multiple categories of rewards which are only active during specific months of the year.

Secured card
A credit card commonly used by people who want to improve their credit socre but have bad credit or no credit at all. A deposit is required to open the account in case the user defaults on the balance.

Service Charge
Finance charges such as the fee for triggering an overdraft checking account into use, using balance transfer checks, or credit card checks.

Sign-up Bonus
The rewards or cash given to a credit card’s new users.

Store Card
A card for use at a particular retail store. Also called a “retail card”.

Student Card
Credit cards specialized for college students. In addition to building credit, they often have perks like bonuses for good grades and extra cash back on textbooks.

Subprime Credit
Below average credit scores ranging from 580 to 669.

Super Prime Credit
The best range of credit scores credit scores starting at 740+. Also known as “Excellent Credit”.

Travel Card
A card that gives cardholders travel rewards for purchases.

Truth in Lending Act
The Truth in Lending Act (TILA) protects you against inaccurate and unfair credit billing and credit card practices. It requires lenders to provide you with specific loan cost information so that you can comparison shop for certain types of credit cards and loans.

TSA Pre✓
A U.S. government program travelers can apply for which lets them pass through airport security faster after being deemed “low-risk” by a TSA (Transportation Security Administration) background check.

Unsecured debt
Debt that is not guaranteed (“secured”) by collateral. Most credit cards are classified as unsecured debt because they only require people promise to pay back debt they accrue rather provide any upfront collateral such as a car title.

Visa is a company which handles credit and debit card transactions. They process the communication between merchants and financial institutions (banks and credit unions). Visa is not a lender and does not extend credit to people.