We have compiled a Credit Card Glossary to help you the consumer understand the small print.
Credit Card Glossary
When a consumer has adverse credit, they may have trouble obtaining a new loan or other type of credit product. Bad credit history usually stems from late loan payments, loan defaults and bankruptcy.
Affinity / Contribution Cards
A type of credit card that acts like a regular credit card but also provides that a percentage of the money made from the card will go to a charitable cause. The beneficiary may also receive a contribution at the issuance of the credit card or after its first use.
The annual percentage rate (APR) is a quote required by law that usually appears in brackets. The APR may also appear with other rates including introductory rates. The most commonly quoted rates are those paid on a monthly and annual basis. The APR represents the total amount the customer will pay over the entire term of the loan or credit card including non-interest charges. The APR is normally the highest rate that consumers will see on advertisements for credit cards. The Consumer Credit Act of 1974 introduced the requirement of providing the APR quote. A lower APR is among the more favourable features sought by credit card customers.
An authorized user is someone other than the main cardholder who has full use of the credit card, but without any responsibility of repaying the card’s debts. For example, a company may authorise its employees to use the company credit card.
An authorisation is an approved transaction that shows up in the account’s balance. When a customer makes a charge, the system will approve and eventually post the amount charged. However, if the customer cancels the charge, the system will not process the unposted transaction and will remove it about 14 days after authorisation.
The amount that the customer can still borrow using a specific credit card. Available credit represents the total credit limit minus the outstanding balance and any temporary authorisations (authorised but unposted transactions).
Customers can transfer existing balances on credit cards to other credit cards or to debt consolidation arrangements. One reason for transferring balances is to take advantage of lower rates on other cards. Consumers who are having trouble managing all of their debts may consolidate them into one monthly payment that usually involves easier terms, lower interest rates and cancelling of late payment charges.[/expand]
The financial institution or business that issues the credit card to the consumer.
An option offered with credit cards that allows the user to obtain cash through the card. For example, cards may allow cash advances when making purchases through merchants. Some credit cards will allow users to obtain cash from ATMs.
Chip and PIN
A four-digit ID number that authorises you to borrow money using your credit card. The PIN acts as part of an authentication procedure to prevent unauthorised use.
Credit Card Cheque
A credit card cheque utilizes credit from the customer’s credit card account. Normally, these cheques involve extra fees not represented in the standard annual percentage rate.
ATM Cash Withdrawal
Credit card customers can use their card together with their PIN to withdraw cash from automatic teller machines (ATMs) for maximum convenience. ATMs that display the MasterCard®, Visa® or American Express® logos will accept credit card cash withdrawals.
The abbreviation for the Consumer Credit Act, a set of laws that regulates how banks and other businesses in the UK can lend money. The act became law in 1974.
A credit card is a convenient instrument for borrowing money to purchase items or to obtain cash advances including cash withdrawals from ATMs.
The credit limit is the amount that the customer can borrow using a specific credit card. Once the customer reaches the limit, any attempt to borrow money will result in a rejection of the transaction.
The rating that lenders use to judge the creditworthiness of a customer. They use this rating to decide on whether they should approve the person for a credit product.
Credit Reference Agency
A credit reference agency keeps financial records on most adults in the UK. These records from the three main credit reference agencies allow lenders to create credit scores for potential customers. The credit scores help the lenders decide on whether they will extend credit cards or loans to the customer.[/expand]
A card that allows the user to make purchases and to withdraw cash by using an existing bank account. The transaction draws funds directly from the account and the balance adjusts automatically in real-time. Debit cards are an alternative to cash, cheques and credit cards.
A setup by which an organisation can directly withdraw funds from an individual bank account.[/expand]
The official currency of the most members of the European Union. The EU introduced the Euro in 1999 and the currency utilizes the “€” symbol.[/expand]
The abbreviations for the Financial Services Authority of the United Kingdom. The FSA is responsible for regulating the the financial services sector in the country.[/expand]
An amount of money determined by rates on borrowed money. The borrower must pay this amount on a monthly basis in addition to repaying the capital amount borrowed.
A period in which the customer can use a credit card without having to pay interest on the borrowed money. Typically, this is about 50 days or more. The bill is interest-free so long as the customer settles the debt in full each month.[/expand]
[expand]Joint Account Holder
An account held jointly by main and joint account holders. All the account holders have equal authority over the account and they are all liable for its debts.[/expand]
The person who is liable for repaying the credit card debt. They have authority over the account, i.e., they can authorise additional card users.
The minimum amount that the customer must pay each month toward their credit card debt and charges.[/expand]
The amount of capital currently owed on the credit card. The amount does not include interest or other charges.[/expand]
[expand]Payment Due Date
The date by which the next credit card payment is due. The customer must at least make a minimum payment on their overall debt by this date to keep the credit card in order. If the payment is late, the customer may incur a late payment fee.
Payment Protection Insurance (PPI)
Insurance that provides cover for cardholders who are unable to pay their credit bills due to illness or some other valid reason. The insurance will pay the credit bills for a set period as stated in the policy.
The rate will apply to the card during a set promotional period and then will switch back to the normal rates.[/expand]
The cardholder receives a monthly printed and/or electronic bill that provides details on their credit card account including amount owed and payment deadlines.
This date is the last day covered by the monthly statement. All the information in the bill refers to activity up to this date.
A store card is a credit product offered by retailers that allows them to make purchases at that store. Therefore, it is basically a store-specific credit card except in cases where the card also has the endorsement of a major credit card company like Visa or MasterCard.[/expand]
When a cardholder makes a transaction, a temporary authorisation occurs in which the system approves the transaction but does not officially post it to the account. The available credit limit will adjust for the temporary authorisation. Eventually, the amount will post to the cardholder’s balance. However, if the merchant does not complete the transaction, it will eventually expire from the available credit limit and from the cardholder’s balance.[/expand]
The systems may approve a transaction but not post it officially to the account. The approval is the first step and normally the system will replace the unposted transaction with an official charge. However, if the cardholder cancels the charge or the merchant fails to complete the transaction, the system will remove the unposted transaction from the balance and from the available credit limit.[/expand]
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