Credit Card Glossary

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A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

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This is a card that can be issued to a person other than the primary credit card holder. Additional cards may be issued for your spouse, children, or anybody else you want to use your existing line of credit.

An additional cardholder is not responsible for any charges made on the credit card even though his or her name appears on the credit card. This responsibility remains with the primary cardholder and a cosigner, if any. However, in case of a joint account all cardholders are responsible for all charges. To obtain an additional card contact the issuer of your credit card.

Most issuers charge an annual membership or participation fee. Annual fees range from zero dollars to several hundred dollars, depending on the credit card.

The APR is a measure of the cost of credit, expressed as a yearly rate. It also must be disclosed before you become obligated on the account and on your account statements. The card issuer also must disclose the "periodic rate" - the rate applied to your outstanding balance to figure the finance charge for each billing period.

Some credit card plans allow the issuer to change your APR when interest rates or other economic indicators - called indexes - change. Because the rate change is linked to the index's performance, these plans are called "variable rate" programs. Rate changes raise or lower the finance charge on your account. If you're considering a variable rate card, the issuer must also provide various information that discloses to you: that the rate may change; and how the rate is determined - which index is used and what additional amount, the "margin," is added to determine your new rate. At the latest, you also must receive information, before you become obligated on the account, about any limitations on how much and how often your rate may change.

See "Annual Percentage Rate".

An Authorization occurs when you present your card or account number to a merchant for payment. An authorization reserves the purchase amount against your available credit to ensure that the credit is available at the time the transaction posts to your account.

This is a method by which many creditors calculate Finance Charges. Adding each day's balance and dividing that total by the number of days in a Billing Cycle determines an Average Daily Balance. The Average Daily Balance is typically multiplied by the Periodic Annual Percentage Rate in order to calculate the amount of Finance Charges assessed on an account.

Available Credit is the amount of credit you have available to use for Purchases, Balance Transfers and Cash Advances.

ATMs are self-service machines that dispense cash and process deposits.

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A Balance Transfer is the process of transferring a balance from one credit account to another.

The Billing Cycle is the period between billings for products and services - usually a month.

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Carrying a Balance means the balance revolves on an account from one month to another. When a cardholder carries a balance he/she does not pay the balance in full every month.

A Cash Advance allows you to obtain cash from your credit card account. Please note there may be restrictions on the amount you may withdraw. Typically, a Cash Advance is obtained through a financial institution or an Automated Teller Machine (ATM).

The interest rate is often slightly higher on cash advances than it is on purchases. In addition, there is usually no Grace Period for cash advances and transaction fees are often charged.

A Cash Advance Fee is a charge by the bank for using a credit card to obtain cash. This fee can be stated in terms of a flat per-transaction fee or a percentage of the amount of the Cash Advance.

The Cash Advance Limit is the established limit to which cardholders can withdraw cash from their accounts. This limit is typically established as a percentage of the Credit Line.

May be a family member or a friend who is willing to act as a guarantor of the potential credit card debt that may be accumulated by the credit card holder.

It is not required to have a cosigner on your credit card application, but in many cases it may increase your chances of obtaining a credit card. For example, for teen-agers who have not yet had an opportunity to establish their own credit histories, having their parents to be cosigners on the credit card application will, in most cases, increase the chances of obtaining a credit card. Before you ask anybody for the favor of cosigning your application, make sure that the cosigner reads and understands the responsibility, and potential liability associated with being a cosigner.

Credit Payment Insurance is a credit protection service offered by some creditors to their customers. It assists customers in maintaining a good credit rating in times of financial difficulty.

A Credit on your statement reflects any monetary transaction other than a payment that decreases your Outstanding Balance.

Credit cards provide convenience of purchasing goods and services and paying for them later. The outstanding balance on the credit card account can be paid either in full after receiving a monthly statement, or by making payments over time. Finance (interest) charges apply to any unpaid balance. A credit card account is a form of a loan, and therefore, all charges made on the credit card must be eventually paid by the credit card holder.

Credit Card Issuer is an organization that is issuing credit cards and provides credit lines to individuals or organizations. In most cases, these issuers are financial institutions such as banks or credit unions. Department stores, gasoline companies, and other organizations also issue credit cards.

The Credit Limit is the largest amount of outstanding balance that you are authorized, by the credit card issuer, to carry on your credit card.

A Credit Reporting Agency compiles data on consumers' credit payment history. Trans Union, Equifax, and Experian are the three major Credit Reporting Agencies in the United States.

The Credit Report is a critical factor in credit scoring systems that lenders use to issue credit cards, mortgages, or other loans. A Credit Report contains information regarding a customer's payment history and comes from a Credit Reporting Agency.

A Creditor is an entity to whom money is owed.

The Current Balance is the total amount of credit spent on Purchases, Balance Transfers, and Cash Advances. This balance may include Finance Charges and fees.

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The Daily Periodic Rate is used to calculate the amount of Finance Charges assessed on an account. It is typically calculated by dividing the Annual Percentage Rate by 365.

A Delinquency means that payment is overdue on an account.

A credit card issuer should receive your payment on or before the due date that is stated on your monthly statement. Make sure to make your monthly payment several business days before the due date so that your payment arrives on time. The due date is the date by which the credit card issuer should receive the payment, not the date by which you should pay your credit card bill.

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Finance Charge is a fee for using credit. It is comprised of all interest charges, any transaction fees, and any other fees.

A rate of interest charged on an account. This rate is in effect for the life of the loan, provided the account remains in good standing. This rate will not fluctuate based on the Prime Lending Rate.

See "Grace Period".

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Grace Period (Free Period) is a period of time when you are not charged any interest for new purchases made with your credit card.

Knowing whether a card gives you a free period is especially important if you plan to pay your account in full each month. Without a free period, the card issuer may impose a finance charge from the date you use your card or from the date each transaction is posted to your account. The standard Grace Period is usually between 20 to 30 days.
Important: If your required payment does not reach the credit card issuer by the due date, the Grace Period may be waived and you may be charged interest starting the date your purchase was posted.

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A rate of interest charged on an account for a specific, limited period of time. This rate is typically lower than the Ongoing Rate and is used by the creditor as an incentive.

See "Credit Card Issuer".

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A Late Fee is a charge to your account if the minimum payment due does not reach the lender by the payment due date.

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The Maximum Credit Limit is the maximum amount of credit limit that a credit card issuer is willing to authorize for a particular credit card.

It is very important to note that you need a very good credit history to be approved for the maximum credit limit. In most cases, your actual authorized credit limit will be lower than the maximum credit limit stated by the credit card issuer on any promotional material.

The Minimum Credit Limit is the minimum amount that you will have available on your credit card if you are approved.

In most cases, your actual authorized credit limit will be higher than the minimum credit limit stated by the credit card issuer on any promotional material.

The Minimum Monthly Payment is the smallest monthly payment that is required to be received by the credit card issuer by the due date. The minimum payment is stated on your monthly statement, and usually is around 3% to 5% of your total outstanding balance, or it is some other minimum fixed amount.

The Minimum Payment Due is the smallest amount you must pay each month to keep your account in good standing. Your minimum payment can vary from month to month based on your current balance and is typically based on a percentage of the Outstanding Balance. You can always pay more than your minimum payment.

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A rate of interest charged on an account for a period of time. This rate can be either a fixed or Variable Rate.

Over Limit refers to the amount of your balance that exceeds your Credit Limit. If this occurs, an Over Limit Fee will be assessed.

An Over Limit Fee is a charge for exceeding the Credit Limit on the account.

The total amount of money that you owe to the credit card issuer.

The outstanding balance constantly changes as your purchases, cash advances, interest charges, and any other charges are added to the previous balance, and your payments are deducted from the previous balance.

If exceeding your credit limit is permitted by the credit card issuer, the issuer may charge you a fee for having an account balance higher than the approved credit limit. This fee varies among credit card issuers.

Exceeding your credit limit is not recommended because it may be recorded in your credit history.

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A Post Date is the date that the transaction was debited or credited to your account.

A credit offer with a "Pre-approved" status means that a potential customer has passed the preliminary credit-information screening necessary to obtain credit with the creditor.

A Personal Identification Number (PIN) is a secret number that identifies you and allows you to perform transactions at ATMs.

The Prime Rate is the interest rate that banks charge to their best customers. Most individuals and institutions cannot borrow at the prime rate because the prime rate is reserved only to those with the highest credit rating. These are usually well established institutions that are expected not to default on a loan.

Credit card issuers and other lenders often use the prime rate as a base rate to determine the Annual Percentage Rate (APR). Since the prime rate fluctuates from time to time, loans tied directly to the prime rate (e.g. 'prime + 8%') are called 'variable rate' loans. The APR on the variable rate loans therefore fluctuates in the same way as the prime rate fluctuates.

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Repricing is the act of changing a cardholder's APR.

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A Secured Card is a credit card that a cardholder "secures" with a deposit to ensure payment of the Outstanding Balance if the cardholder defaults on payment. Secured credit cards are general-purpose credit cards targeted to customers with imperfect or limited credit histories who do not qualify for a traditional unsecured credit card loan.

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The Transaction Date is the date a transaction was initiated.

Transaction Fees are fees that are charged by credit card issuers for cash advances from Automated Teller Machines (ATM) or a bank, cash advance checks, returned cash advance checks, late payments, overdrawing on your credit limit, or in some cases monthly fees charged by some issuers. Many of these fees can be avoided if the credit card agreement is followed.

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An Unsecured Credit Card does not require any cash deposit or any other collateral before the credit card is issued. The unsecured credit card is backed only by your credit history and your financial resources available. If your credit card application is approved, an unsecured line of credit is available for your use. The limit of such credit line is determined by the credit card issuer.

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A rate of interest charged on an account. This rate may change and is typically calculated by adding or subtracting an amount to a base standard interest rate, usually the Prime Lending Rate.

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