Like any other industry, when you start delving into it, you come across all
these terms and acronyms that mean absolutely nothing to you. But relax
– the following guide will help you over the bumps to a smooth ride.
- ACH Payment
Payments made online that will be reflected on your billing statement are called
ACH (Automated Clearing House) Payments.
- Access checks
Access checks, also known as cash advance checks or convenience checks, are
issued against a line of credit. The transaction is applied to the cash balance
and a transaction fee may be applicable.
An adjusted balance is determined by subtracting all payments made during the
billing cycle from the outstanding balance at the beginning of the billing
cycle, prior to the calculation and accrual of finance charges to the account.
An affinity card is best described by its other name, a co-brand card. This
card is offered by a lending institution in conjunction with another
organization. A couple of examples are the Tiger Woods American Express Card and
the General Motors Visa Card. Frequently, use of this card entitles holders to
special discounts or deals.
An annual fee is charged on a yearly basis for the customer's continued
participation in an open-end credit plan.
Annual Percentage Rate (APR)
The APR is the total yearly cost of the interest on a loan, expressed as a
An authorized user is a person who’s been given authority by a primary
cardholder to make charges to that primary cardholder's account, but who doesn’t
have legal responsibility for repaying the account.
Average daily balance
The average daily balance is calculated by adding each day’s outstanding balance
(in a billing cycle) and then dividing that total by the number of days in the
billing cycle, resulting in the finance charges.
When an unpaid credit card debt is transferred from one issuer to another, it’s
known as a balance transfer.
Balance transfer fee
A balance transfer fee is charged to customers for making a balance transfer to
discourage them from doing so.
A bankruptcy is a legal mechanism, the purpose of which is to modify or
eliminate a person's obligation to repay certain kinds of debt in order to
permit the person to get a "clean start” economically. Bankruptcy is a serious
step for a borrower because it can severely limit access to credit for years to
A billing cycle is the period between billing statements.
A billing statement is sent periodically by a credit card issuer to the
customer, summarizing all transactions and other activity applicable to that
credit card account, including balance, purchases, payments, credits and finance
The cardholder agreement is the written statement that sets forth all of the
terms and conditions applicable to a credit card account. It generally outlines
the cardholder's obligations with respect to their credit card account, such as
repayment, default, billing disputes and other associated terms.
Cash advance fee
A cash advance fee is charged for using a credit card to obtain cash (generally
at an ATM or bank window). This fee can be stated in terms of a flat, per-transaction fee or a percentage of the amount of the cash advance. Generally, cash advance fees do not have a grace period, which means that
interest accrues from the moment the money is withdrawn.
A cash card has a set amount of value which can be read by a special cash card
reader. Participating retailers will use the reader to debit the card in
increments until the value is gone. The card is like cash – it has no built-in
security, so it can be used by anyone if lost or stolen.
A charge card requires a full payment of the entire accrued balance by the due
Co-signer (Joint Applicant)
A person who signs a credit card application with the primary applicant is known
as the co-signer. The co-signer agrees to be legally liable for any balance
incurred on the credit card, regardless of who used the card.
Credit bureau (credit reporting agency)
A credit bureau collects and sells information regarding people and their credit
history. The company issues credit reports that list a person’s creditors and
their creditor’s history with an individual.
Credit insurance pays or pays off credit card debt should the borrower be unable
to pay the debt as a result of the loss of employment, death or disability.
The maximum amount of available credit a cardholder may access is called the
A credit report is a compilation of information regarding a consumer’s credit.
The credit report is often a critical factor in credit scoring systems that
lenders use to issue low interest credit cards, home equity mortgages or other loans.
A debit card is issued by a bank to provide direct access to a cardholder's
checking or savings account. Any withdrawal of funds is immediate with online
debit cards and delayed a day or two with offline debit cards.
A card issuer may consider a cardholder in default if the cardholder fails to
perform all of the duties and obligations set forth in the cardholder agreement.
If the letter "F" appears after the annual percentage rate (APR) the interest
rate is fixed and not subject to adjustment.
A finance charge is a charge made for consumer credit, including interest and
A fixed rate is an interest rate that does not vary based on an index but is
fixed at a previously disclosed level.
Foreign currency surcharge
A foreign currency surcharge covers the cost of converting purchases made in a
foreign currency to the cardholder’s home currency.
A gold credit card has a gold hue and may offer a larger line of credit than a
standard card, and may also provide extra perks or incentives to cardholders.
A grace period is the period of time you have without a finance charge on new
purchases if the total new balance is paid in full each month by the payment due
date noted on your periodic billing statement.
A guarantor is an individual who is financially liable for an account and does
not have charging privileges.
An index is an objective, published figure (not controlled by the lender) used
to establish a lending rate. Some common indices are the London Interbank
Offered Rate (LIBOR) and the Prime Rate as listed in the Wall Street Journal.
The indexed rate is determined by adding the margin to the published index.
The interest rate is the factor used to calculate the finance charge applied to
your account, often expressed as an annualized rate.
Introductory (or intro) rate
A lender may charge an introductory or teaser rate, which is lower than their
normal interest rate, for a short period of time (usually commencing when an
account is established). After the introductory period is over, the rate
charged increases to the stated post-introductory interest rate.
Joint credit is issued to two people based on an evaluation of each party's
respective assets, incomes and credit history. Both parties are fully
responsible for repaying the debt.
Late payment fee
A customer is charged a late payment fee when their monthly payment has not been
received as of the due date for payment as shown on the billing statement.
MasterCard, a product of MasterCard International, is distributed by issuing
financial institutions around the world. Master Card's products are issued by
23,000 financial institutions in 220 countries and territories
A minimum payment is the minimum amount a cardholder can pay to keep the account
from going into default. Most card issuers require a minimum payment of at
least 2 percent of the outstanding balance.
Monthly periodic rate
The monthly periodic rate, calculated monthly, equals the yearly rate divided by
The new balance is the outstanding amount calculated as of the statement closing
date, also known as total new balance.
Offline debit card
An offline credit card shares traits of both ATM and credit cards. Offline
debit cards have the VISA or MasterCard logo on them and can be issued by a
bank, instead of, or in addition to, an ATM card. They can be used at any
establishment that displays the VISA or MasterCard logo, but using them does not
access a line of credit -- it debits a customer's checking account, but there's
a delay of 24 to 72 hours before the debit is made in the account.
Online debit card
An online debit card deducts funds from the bank account immediately, as soon as
the card is used. It may have the VISA or MasterCard logo, or only the issuing
bank's logo, like an ATM card.
An over-the-limit fee is charged for exceeding the credit limit on the card.
A pay-down program consists of the steps for paying down a credit card balance.
The first step is to stop charging on the card and make the normal monthly
minimum payment by the due date. Then, two weeks later, send half the amount
again, and two weeks later, half again. The half-payments are made on the
two-week schedule until the balance is paid.
A penalty rate, an increase in a card’s annual percentage rate, may go into
effect in the event an account holder defaults on a payment or other obligation.
The periodic rate is determined by dividing the APR by a unit of time (e.g.
monthly periodic rate or daily periodic rate).
Personal Identification Number (PIN)
A Personal Identification Number is a security measure required to be punched
into a keypad before a transaction can be completed.
A platinum credit card has a platinum hue, and may offer a larger line of credit
(generally $5,000 and up) than a standard or a gold card, and may also provide
extra perks or incentives to cardholders.
Point of sale (POS)
The point of sale is the location where the transaction takes place.
The posting date is the date that a credit or charge is recorded on your
A credit card with a pre-approved offer means that a potential customer has
passed a preliminary credit screening.
The previous balance is the outstanding balance on the account at the end of the
previous billing cycle.
The primary cardholder is the person listed on an account who shares financial
responsibility with the secondary cardholder.
The prime rate is an index used to calculate the applicable APR for a variable
Private label cards
A private label card is issued by a retail outlet, such as a department store or
gasoline company, that contains the logo of the private company. It is
generally accepted only by the retailer who issued it.
Rebate credit card
A rebate credit card allows the customer to accumulate cash, merchandise or services
based on card usage.
Recent activity refers to the transactions posted to your account for the
current billing cycle, and since the last statement.
A revolver is a term credit card issuers use for cardholders who roll over part
of the account balance to the next month, instead of paying off the balance in
full each month.
Revolving line of credit
A revolving line of credit is an agreement to lend a specific amount to a
borrower and to allow that amount to be borrowed again once it has been repaid.
Most credit cards are considered to have a revolving line of credit.
A secondary user jointly applies for a credit card and has financial
responsibility for the repayment of the account balance.
A secured card is a credit card that a card holder secures with a security
deposit to ensure payment of the outstanding balance if the card holder defaults
on payments. It is used by people new to credit or people trying to rebuild
their poor credit ratings.
A standard card is the basic card offered by issuers. Customers with higher
incomes and good credit reports can qualify for the higher-limit gold and
If the letter T appears after the annual percentage rate (APR), the interest
rate is based on tiered pricing, with different periodic rates applied to
different levels of the outstanding balance.
A titanium credit card has titanium hue, and carries an even higher credit limit
range and benefits than a platinum card.
The transaction date is the date that goods or services were purchased or the
date the cash advance was made.
Truth in Lending Act
The Truth in Lending Act is a federal law that requires lenders to provide
standardized information so borrowers can compare loan terms. In general,
lenders must provide information on what credit will cost the borrowers, when
charges will be imposed and what the borrower’s rights are as a consumer.
An unsecured debt is not guaranteed by the pledge of any collateral. Most
credit cards are unsecured debt, which is one reason why their interest rate may
be higher than other forms of lending, such as mortgages, which use property as
If the letter V appears after the annual percentage rate (APR), the interest
rate is variable and subject to change.
A variable rate is an interest rate that varies based on the combination of a
published index rate and a previously disclosed margin.
VISA cards, a product of VISA USA, are distributed by financial institutions
around the world. Nearly 600 million cards carry one of the Visa brands and
more than 14 million locations worldwide accept Visa cards.
A wire transfer transfers funds electronically from one financial institution to
Gareth Marples is a successful freelance writer providing valuable tips and advice for consumers about online credit card applications, searching the Internet for credit reports & free credit checksand home mortgage, payday, and auto loans. His numerous articles offer moneysaving tips and valuable insight on typically confusing topics.