Glossary
There might be few terms you may not be familiar with when it comes to credit cards and credit card applications. First Credit Cards have compliled a list of credit cards terms to help you better understand commonly used words, phrases, and acronyms in the credit card industry.
Airline Credit Cards: With Airline Credit Cards, you can earn airline mileage credits as you spend with frequent flyer credit cards. If you are a Frequent Flier or travel a lot, an airline credit card could help save you money.
Annual Fee: An annual fee associated with having a credit card. This is a separate fee from interest rate on purchases.
Annual Percentage Rate (APR): The annual percentage rate imposed when a balance is held on a credit card. When an outstanding balance is held, this rate is applied to your outstanding balance each month.
Bad Credit: It is an expression used to describe a poor credit rating. Common practices that can damage a credit rating include making late payments, skipping payments, exceeding card limits or declaring bankruptcy. “Bad Credit” can result in being denied for future credit.
Balance Transfer: The movement of an existing balance from one credit card to another credit card, usually to obtain a lower annual percentage rate (APR) and, in turn, save money.
Balance Transfer Fee: A one-time fee charged by a credit card company to transfer a balance from another account to that particular credit card. It is generally 1% to 5% of the transferred balance. For instance, a balance transfer fee could be 4% of the transferred balance up to a maximum of $50. Not all credit cards charge this fee.
Business Credit Cards: Usually issued to corporate executives or business owners in order to more easily keep business expenses separate from personal charges.
Cash Back: Cash back returns to you a percentage of the total amount spent on your credit card over a specific period of time, usually on a monthly or quarterly basis. This feature is particularly useful if you normally pay your credit card bills each month, as it means you get an effective discount on the products bought with your credit card.
Co Branded Credit Cards: Co-branded credit cards are sponsored by both the issuing bank and a retail organization, such as a department store or an airline. Cardholders may get benefits, such as discounts or free merchandise, from the sponsoring merchant, based on account usage and terms.
Commercial Credit Cards: These cards are issued for business use and may include Corporate Cards, Purchase Cards, Business Cards, Travel and Entertainment Cards.
Credit History: Your credit history shows the extent to which you pay your bills on time and how much you may owe particular parties. Credit card issuers use this information to decide whether to provide customers with credit cards.
Credit Limit: The total amount of money that may be charged onto or held as a balance (or a combination of both) on a particular credit card.
Finance Charge: Interest costs and other transaction fees (i.e. balance transfer fees, cash advance fees, late fees, overlimit fees) that occur with the use of a credit card.
Fixed Rate (or Fixed APR): An annual percentage rate that does not change throughout the year, unlike an introductory APR that changes after a specific period of time (typically 3-12 months).
Grace Period: The time allowed to pay your credit card bill without being billed a finance charge and/or late fee. It is usually 10-28 days.
Instant Approval Credit Cards: With instant approval credit cards, you can apply online and usually receive notice via email of your acceptance or denial within seconds of filling out an online credit card application. To receive an instant approval, you must usually have a good to excellent credit rating.
Introductory Rate (or Intro APR): This is a temporary, lower annual percentage rate that typically lasts from 3-12 months. After the introductory period, the APR generally rises.
Issuer: Any financial institution, bank, credit union, or company that issues plastic cards to cardholders.
Low Interest Credit Cards: This type of credit cards feature either a low fixed rate APR or a low introductory APR.
Minimum Payment: This is the minimum amount of money a cardholder has to pay each month. This number varies according to a number of factors, but is generally based on the amount of the cardholder's outstanding balance.
Overlimit Fee: A fee charged when your balance exceeds your credit limit.
Prepaid Credit Cards: Prepaid debit cards can help you control your expenses. A reloadable debit card allows you to only spend up to the amount you have pre-deposited into the account.
Prime Rate (or Prime Interest Rate): The interest rate at which banks lend to their most creditworthy (prime) customers. The prime rate is known to change but not on a regular basis.
Secured Credit Cards: Credit cards that require collateral for approval. With secured credit cards, a security deposit is needed to secure the credit card. The amount of the security deposit usually equals the credit limit for that particular credit card. Generally, secured credit cards are for people with no credit or poor credit who are trying to build or rebuild credit history.
Unsecured Credit Cards: Credit cards that are not secured by collateral. Customers qualify based on credit history, financial strength and earnings potential.
Variable Interest Rate: With variable-rate cards, the APR changes when interest rates or other economic indicators change.
|
