The Glossary for Your Back Pocket

Credit Card Terms 101

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


A

Account Holder

The person or persons who applied for and were issued use of the credit card. They are the party responsible for paying the amounts charged. The account holder is solely responsible for the debt accrued, even if they allow an authorized user to charge to their card. See Authorized User or Cardholder.

Account Number

The account number is assigned to a credit card customer by the financial institution. It is a unique number and primary identifier that is used on statements and stamped/encoded on the credit card.

Additional Cardholder

A credit card account holder can often authorize additional users of their credit card. An additional card may be issued in the authorized user's name. See Authorized User.

American Express Card

Often dubbed AmEx, American Express is one of the leading credit card issuers in the world. Unlike Visa and Mastercard, who work in conjunction with multiple financial institutions, AmEx issues its own consumer and business credit cards.

Annual Credit Report

This is a yearly credit report. See MoneyGeek's Your Annual Credit Report: When to Get It and How to Read It to learn more about this topic. See also Credit Report.

Annual Fee

An annual fee is an amount charged by the credit card company, separate from the interest rate on purchases. This amount varies by issuer. Sometimes the fee is waived for the first year. Credit card seekers are wise to determine if the annual fee is worth the rewards. In some cases, the rewards are well worth an annual fee.

Annual Percentage Rate (APR)

APR is calculated using the interest rate charged monthly on outstanding credit card balances plus any annual fees. APR rates are tied to the prime rate and often vary depending on the applicant's creditworthiness, aka FICO score. As the Consumer Financial Protection Bureau (CFPB) points out, there is often an initial or promotional APR for a limited period of time, followed by higher, long-term APRs. The CFPB suggests that you pay close attention to exactly when the introductory period or promotion ends in order to avoid paying higher interest. See Prime Rate and Fair Isaac Corporation (FICO).

CREDIT RATING
CREDIT RATING
WHAT APR TO EXPECT

Excellent Credit

720 - 850

11.24 - 23.24 %

Good Credit

660 - 719

11.24 - 23.24 %

Fair Credit

600 - 659

13.24 - 25.24 %

Poor Credit

350 - 599

18 - 29.99 % (Unsecured)

Limited/No Credit

NA

18 - 29.99 %

Annual Percentage Yield (APY)

APY is not the same as APR, and knowing the difference is important. APY reflects the annual rate of return on investment, including the effect of compound interest.

Application Fee

A one-time fee charged by a financial institution when you submit an application. Typically reserved for people with bad credit, the fee may be charged regardless of whether you are approved.

Authorization Code

A special code the credit card issuer or its authorizing processor provides to indicate approval for a transaction request.

Authorized Signature

The signature of the person to whom the credit card was issued, often found on the back side of the credit card and/or on transaction receipts for purchases made with the credit card.

Authorized User

The account holder and anyone who has been given legal permission by the account holder to use the credit card. Authorized users can include individuals besides the account holder and are not always responsible for paying account balances. An authorized user who is not the primary account holder may have limited management control. For example, the user may report a lost or stolen card but may not close the account or add another authorized user.

Automatic Payment

A pre-determined payment that is set to be withdrawn from a specified bank account on a specified day and is often a specified amount or "minimum due."

Autopay

The process of making automatic monthly payments of specified amounts towards a credit card balance.

Available Credit

The amount of credit available as of that moment. This would be the difference between the credit limit and any outstanding charges on the account that have been or are in the process of posting.

Average Daily Balance

The average daily balance is calculated by adding each day's balance and then dividing by the total number of days in a billing cycle. This determines how much interest you have to pay on the outstanding credit card balance.

B

Balance

The amount owed on the credit card at any given time. The balance carries over monthly and is what is used to calculate how much interest will be due at the end of the statement period.

Balance to Limit Ratio

Also known as a credit utilization ratio, this is the amount owed compared to the maximum limit on the credit card. It is used in the calculation of credit scores. The lower the ratio, the better it is for your credit score. In other words, a low balance and high available credit is a good thing.

Balance Transfer

A balance transfer happens when outstanding balances from one or more cards are transferred to one card. This often helps consolidate credit debt or lessen the interest paid when higher interest cards are transferred to a lower rate card. See MoneyGeek’s Quick Guide to Understanding Balance Transfers for more on these type of cards.

Balance Transfer Checks

These checks often look like checking account checks in that they are used to pay off one credit card, while the balance is actually transferred to the new credit card.

Balance Transfer Fee

The fee charged to transfer balances to a new credit card. This can be a flat fee, or it can be a percentage of the transfer amount, typically from 3-5%.

Bank

A bank is a financial institution that is regulated by the government. Banks are licensed to receive deposits and lend money, but they can also have a few roles in the credit card process. They might issue a credit card, represent a merchant, or be involved with the payment of a credit card bill.

Bank Identification Number (BIN)

The unique identifying number of a financial institution.

Bankruptcy

Consumers and businesses may seek legal help when they do not have the funds to pay bills owed. This is called declaring bankruptcy. Bankruptcies are reported to credit bureaus and adversely affect credit scores. See also Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.

Batching

Merchant's "batch" the day's sales every night to electronically send the day's transaction data to the credit card processor in order to receive payment.

Billing Cycle

The billing cycle is a recurring time period — usually 30 days — set to a specified date every month and used by card companies to issue bills and calculate interest charges. Card companies calculate interest charged to the account based on the remaining balance at the end of each billing cycle. Under the federal Credit CARD Act of 2009, due dates must be the same day every month, and payments due on weekends or holidays are not subject to late fees. See CARD Act.

Billing Statement

Monthly summary issued by the card company that itemizes every transaction occurring in the previous billing cycle and includes rate disclosures and fees.

Business Credit Card

A credit card applied for in a business's name as opposed to an individual's name. While business cards are subject to their own set of rules, they are often still held in an individual's name, making the applicant responsible for the debt. Average annual fees can be as high as $450. See MoneyGeek's Guide to Finding the Best Credit Card for Your Business for more information on these type of cards.

C

Cancellation

Terminating your relationship with a credit card company, or canceling the card, requires a phone call or letter, sometimes both. The credit card issuer also has the right to cancel your credit card if the terms or policies are not followed.

CARD Act

The Credit Card Accountability, Responsibility and Disclosure Act of 2009 was put into effect on May 22, 2009. The main protections of the act include restricting when certain credit card interest rate increases can be made on existing balances and requirement of 45 days advance notice of significant changes in credit card terms. The CARD Act gives consumers at least a 21-day grace period to pay their balance on new purchases before interest begins accruing.

Cardholder

A cardholder is the credit card account holder and any person authorized to use the account in which there is a card for their personal use. Take a look at MoneyGeek's guide on credit card holder rights.

Card Member Agreement

Required by federal law as a consumer disclosure, a card member agreement includes the terms and policies set forth by the credit card issuer that must be adhered to by the account holder and any authorized user, when applicable.

Card Reader

A card reader is the electronic device that reads encoded chips or electromagnetic strips in the plastic credit cards. Merchants use these to gain approval for transactions at the point of sale.

To "Carry A Balance"

Carrying a balance refers to not paying off the entire amount owed, in full, when the bill comes due.

Cash Advance

A cash advance is the withdrawing of cash through an ATM or other financial agency against your credit line. When using your credit card to get cash, there is either a flat fee per transaction, or a fee is imposed based on the amount withdrawn. As a general rule, cash advances incur significantly higher interest rates than making purchases with your credit card. To learn more on this topic, see MoneyGeek's guide on cash advance credit cards.

Cash Advance Fee

A fee charged to withdraw cash against your credit line.

Cash Back

Some cards offer a cash back incentive, based on your spending, where using your card can earn you anywhere from 1-5% cash back. Others guarantee a flat amount returned to you once you've hit a certain level of spending. If you are looking for a cash back card, see MoneyGeek’s take on finding the right cash back credit card for you.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy discharges debts owed for an individual or household. To learn more about Chapter 7 bankruptcy, see MoneyGeek's guide on Chapter 7 vs. Chapter 13 Bankruptcy.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy allows for the restructuring of debts so that they may be repaid over a period of three to five years, under bankruptcy court supervision. See MoneyGeek's guide on Chapter 7 vs. Chapter 13 Bankruptcy to learn more about the type of bankruptcies.

Charity Credit Card

As an incentive, a credit card issuer will offer to make donations to a certain charity based on your card use.

Charge Back

The process of charging back an amount from a prior transaction, i.e., for refunds or accidental charges.

Charge Card

Used like a credit card, however, full payment is required by the statement due date. Balances cannot be carried over on charge cards, and there is no interest rate.

Chip Card

A chip card has a "smart chip" or EMV chip embedded in the plastic to allow for quicker and safer transactions. The chip is the small metallic square you see on the front of the card. See EMV Chip.

Cloning

The fraudulent duplicating of a credit card is called cloning.

Closed-Loop

A gift or credit card that can be used only in a single store or group of stores, such as retail clothing or department stores, is termed a closed-loop card.

Co-Signer

A co-signer is usually a family member or friend of an applicant who cannot get approved for a credit card on their own merit. Co-signers accept responsibility for the debt should the applicant not be able to pay it. They are just as liable for the debt as the applicant — any credit reporting on the account is made on both individual's credit reports.

Collection Accounts

Past due debts that are not being repaid can be sent out as collection accounts after a set time period. Collection accounts are reported to the credit agencies and can negatively affect your credit score.

Collections Agency

A third-party company hired by a card issuer (or that purchases a consumer's delinquent account from a card issuer) that pursues consumers for payment of an overdue credit card debt. See MoneyGeek's resource guide on How to Pay off Debt in Collections to learn more about managing debt.

Consumer Credit File

A consumer credit file is kept by the credit reporting agencies, containing the data and history of a consumer's debt repayment records. The information is used to determine credit scores and ratings.

Consumer Financial Protection Bureau (CFPB)

Federal agency created in 2010 whose stated mission is to carry out federal consumer financial laws, including eliminating unfair business practices. The CFPB has the authority to issue rules and enforce these laws.

Convenience Checks

Convenience checks are much like checking account checks, but the amounts in which you write them are considered cash advances, and you are charged accordingly. See Cash Advance.

Credit Application

A credit application is a written or verbal (via phone) request for an extension of credit. Proper disclosures must be provided to the applicant regarding the cost of the credit, including the annual percentage yield (APY) and all associated fees.

Credit Bureau

A credit bureau is an agency that researches and collects credit information on consumers. It then sells the information to creditors so they can make a decision as to whether or not to approve you for a loan or line of credit.

Credit Card Company

A credit card company issues credit cards, clears the transactions and makes a profit from it. There are four main credit card companies; Visa, Mastercard, American Express and Discover.

Credit Card Number

The number imprinted on your credit card and statements is unique to your credit card account and is your credit card number. Taken together, the first six digits are the issuer's identification number.

Credit Freeze

A temporary hold on an individual's credit through the credit bureau, used especially in the cases where identity theft has occurred or is suspected. Also, take a look at MoneyGeek's Protecting Your Credit Report on how to freeze your credit report.

Credit History

Credit history includes data from any reported loan, line of credit, installment purchases, etc. It includes a record of payments made, payments missed, credit limits and balances as of report time. Your credit history and score help lenders determine if you have limited credit, or if it is Excellent (850-720), Good (719-660), Fair (659-600), or Poor (599-300).

Credit Inquiry

A credit inquiry is when a potential lender requests someone's credit file from a credit bureau. Inquiries are recorded and, depending on the frequency and time frames in which inquiries are submitted, can impact the consumer's credit score. See Hard Inquiry and Soft Inquiry.

Credit Limit

The limit that is determined to be the maximum amount the credit card issuer is willing to extend. It may change with fluctuations in income or with any credit reporting that affects your score.

Credit Line

Also known as a credit limit, a credit line is the amount of money that can be charged to a credit card account. Credit scores and history play a large part in how much of a credit line will be offered.

Credit Mix

A credit mix is a combination of different credit types including loans, revolving credit, installments, etc. Having a variety of loans and paying them on time can help boost credit scores.

Credit Rating

A credit rating is an evaluation of the creditworthiness of a borrower. To determine your credit rating, credit bureaus look at many factors, including your payment history, employment stability and income.

Credit Report

A credit report is a set of data compiled by a credit bureau, containing detailed information on a person's credit history, credit accounts and loans, late payments, recent inquiries and bankruptcies. With the borrower's permission, prospective lenders can obtain a copy of the credit report in order to determine the applicant's creditworthiness. See Creditworthiness.

Credit Reporting Agency (CRA)

A CRA is also known as a credit bureau. There are three main agencies: Experian, Equifax and TransUnion. See Credit Bureau.

Credit Score

Your credit score is the number assigned to you by a credit bureau that represents your credit rating. Financial institutions use this when considering whether to grant you a financial loan or line of credit. See MoneyGeek's How to Improve Your Credit Score Guide to learn more about this subject. See FICO Score.

Credit Utilization

Credit utilization is a credit scoring calculation. It assesses how much of a total credit limit is being used to form a credit utilization ratio. For example, if total credit available to a borrower is $10,000 and only $1,000 of it is used, the ratio is relatively low, which can have a positive impact on the credit score. The lesser the debt versus available credit, the better it is for scoring purposes. This term might also be called a balance-to-limit ratio or credit-available-to-credit-used ratio.

Credit Union

Credit unions are nonprofit, member-owned financial institutions. Many offer member benefits such as lower loan rates and services that support local development.

Creditworthiness

Creditworthiness is based on an individual's credit history of repayment, credit score and other factors, such as income, that are relevant to the borrower's ability to pay back their debt obligation.

Customer Service

Most credit card customer service numbers are found on the back of the credit card, on statements, and on the company's website. Customer service can assist with lost or stolen cards, getting balance and statement information, as well as answer any questions the cardholder has regarding their account.

D

Debit Card

Used at the point of sale much like a credit card, a debit card is linked to a bank account, and the money is withdrawn at the time of purchase. Debit card users have the option to authorize the sale by using a PIN or their signature.

Debt Consolidation

Debt consolidation is the process of taking out one new loan to pay off other unsecured loans. High-interest rate loans, such as student loans and credit cards, can be paid off using a lower interest loan, where the borrower only has to make one payment. To learn more on debt consolidation, see MoneyGeek's article on strategies to consolidate multiple debts.

Debt Elimination

Debt elimination is a strategically planned reduction of debt. The "snowball" technique uses the strategy of paying extra on the smallest balances first while paying the minimum payment on larger debts. Once the smallest debt is paid off you move on to the next larger debt, etc. A similar method is the "debt avalanche method," which works on the same principle, but you pay off the account with the highest interest rate first.

Default Judgment

Court's decision to rule in a party's favor because the opposing party failed to respond or answer a complaint or discovery request or another such failure. For example, if a card issuer files a lawsuit over a disputed card payment and the consumer fails to appear in court to answer the complaint, the court may issue a default judgment in the card issuer's favor and hold the consumer liable for the disputed amount.

Demand Letter

Letter sent from a credit card company or collections agency — usually after a consumer fails to respond to past-due notices or phone calls — that requests an overdue or disputed payment.

Discover Card

Discover Financial Services offers a few different Discover cards including a Discover it card, Discover it for students and a business card. Discover is one of the largest credit card issuers in the United States.

Discovery

Court process in which a consumer can request information or evidence held by the credit card company or collections agency pertaining to the disputed credit card amount. The lawsuit plaintiff, the credit card company or collections agency, may also submit information requests during discovery.

Dodd-Frank Act

Short for Dodd-Frank Wall Street Reform and Consumer Protection Act, Dodd-Frank was signed into federal law on July 21, 2010, and included significant changes to financial regulation in the U.S. designed to protect consumers.

Dormancy Fee

Prior to the Credit CARD Act of 2009, dormancy fees were charged when a credit card wasn't used for a certain period of time. Also called an inactivity fee, these fees are no longer allowed in the United States.

Double-Cycle Billing

Practice — which the CARD Act prohibits — in which card issuers use the current balance and average daily balance from a consumer's most recent billing period to determine the interest due, regardless of whether the consumer has already paid off a portion of the balance.

E

EMV Chip

Smart chips or EMV chips (EMV stands for Europay, Mastercard, Visa) are now embedded in select credit cards. It's the small metallic square you will see on new cards. This technology offers enhanced security against counterfeiting or cloning. Instead of swiping these cards, they are inserted into a slot for processing. Another option for select locations would be simply tapping the card on the terminal to process.

Equal Credit Opportunity Act (ECOA)

The ECOA, enacted in 1974, is a U.S. anti-discriminatory law that makes it unlawful for any creditor to discriminate against any applicant on the basis of race, color, religion, national origin, sex, marital status or age.

Equifax

A consumer credit reporting agency since 1899, Equifax is the oldest agency and one of the largest, with information on over 400 million credit holders worldwide. See Credit Reporting Agency (CRA).

Expiration Date

Most credit cards are issued with an expiration date, after which the card is no longer useable. The date is typically embossed on the credit card near the credit card number and says Valid thru or Good thru XX/XX (month/year).

Experian

Experian is a global information services group with operations in 40 countries that also gathers and reports on consumer credit. See Credit Reporting Agency (CRA).

F

Fair Isaac Corporation

FICO is a major analytics software company that produces consumer credit scores (FICO scores) that lenders use to determine whether to provide credit or loans to borrowers.

FAKO Score

Any score that is not a true FICO score yet is referred to as an educational score or a credit score result from taking a quiz or questionnaire and provided by a company that is not a credit agency is termed a FAKO score.

Federal Trade Commission (FTC)

A federal agency whose chief responsibility is to protect consumers by monitoring and halting business practices that are deemed unfair or deceptive to consumers.

FICO Score

A three-digit creditworthiness score, determined through analytics collected by the FICO company, based on income, debt-to-income, credit outstanding, and credit and loan repayment data. FICO scores range from 300 to 850, with 850 being the best score.

Financial Counseling Association of America (FCAA)

The largest association of nonprofit debt counseling services.

Floor Limit

The maximum amount a cardholder can charge at one time without additional authorization from the issuer.

Foreign Transaction Fee

Most credit card companies charge a foreign transaction fee (or foreign exchange fee) on purchases made in a foreign currency, or on purchases that involve a foreign bank. Transaction fees are typically a percentage of the amount of each foreign currency purchase.

Fraud Alert

A fraud alert is a security notice to either a credit card company or credit bureau that a consumer's identity has been, or is suspected to have been, stolen. This could be the result of a request for new credit in that consumer's name. Bureaus may require the consumer to submit proof of identity to validate the request.

Fraudulent User

When a person uses another's credit card to purchase goods or services without the cardholder's permission, they become a fraudulent user.

G

Gas Rebate Cards

An incentive card that offers rebates on or for gas based on the card use. See MoneyGeek's Gas Credit Cards page for more on this subject.

Grace Period

The time between the end of a billing cycle and the due date of a credit card monthly payment during which you are allowed to pay your credit card bill without having to pay interest is called the grace period. During this period, the card issuer cannot charge interest on the balance due. If you pay the balance in full by the due date, you incur no interest charges on the balance. The Credit CARD Act of 2009 requires grace periods to be at least 21 days. The grace period usually applies only to new purchases, not cash advances and balance transfers. See CARD Act.

Guarantor

A guarantor is similar to a co-signer. This is the person ultimately responsible for the credit card debt, or the one who "guarantees" the debt will be paid if someone else defaults on the account. The guarantor does not get charging privileges on the account and doesn't become liable until the lender has exhausted all other means of collection from the original borrower. See MoneyGeek's Credit Card Debt-Free article to learn best ways to pay off debt.

H

Hard Inquiry

Hard inquiry is made when a potential lender checks a consumer's full credit report. An occasional inquiry or a series of inquiries in a set period of time can create little to minimal impact on the credit score. However, multiple hard inquiries over a certain time frame can have a negative impact on your score. See Soft Inquiry.

≫ Learn more: Hard Credit Inquiry vs. Soft Credit Inquiry

Hard Pull

Hardship Program

These are debt relief, credit consolidation and credit counseling services for borrowers who have fallen on hard times. Hardship programs can devise a plan of action to help get you out of debt. See Debt Consolidation.

High-End Rewards Card

For consumers with excellent credit and high income, high-end rewards cards offer a myriad of incentives, including points for travel, dining, special insurances for purchases, car rentals and other offers not extended to regular cardholders. High-end rewards cards are often premium, black, gold or platinum cards with high credit limits over $10,000. See Incentives.

Hotel Rewards Cards

Another incentive card issuers use to entice cardholders to use their card is free hotel stays. Points accumulate with usage or hotel stays paid with the card and can be used toward additional free nights. See also Travel Rewards or Rewards Credit Card.

I

Identity Theft

The stealing of a person's private identity and using it fraudulently for personal or financial gain. Identity thieves often obtain information on their victims through electronic hijacking, phishing (masquerading as a trustworthy entity in electronic communication) or actually retrieving information out of the trash.

Impulse Buy

The spontaneous purchase of something without planning to do so in advance, a potentially illogical decision.

Inactivity Fee

A fee that used to be charged to cardholders for not using their card. See Dormancy Fee.

Incentives

Some credit cards offer incentives for those with a great credit score, such as travel insurance, concierge service or special entertainment opportunities. Incentives can include offers for points or rewards, airline miles, cash back and premium, gold or platinum cards with high credit limits over $10,000.

Inflation

The sustained increase in prices for goods and services, which, in turn, creates a fall in the purchasing value of money, i.e., it costs more, and you get less.

Inquiry

When a lender requests your credit information or credit report to determine creditworthiness, it is termed an inquiry. See Hard Inquiry and Soft Inquiry.

Instant Decision Cards

Today's technology allows credit card companies to give an instant decision. An applicant can apply online, fill out an application, click enter, and get a decision in 60 seconds or less. If approved, a printed copy of the proper disclosures, terms and conditions will be mailed to the applicant. Ultimately, the card is then mailed out to the cardholder.

Interest Rate

The amount, expressed as a percentage rate, it costs to borrow money. Interest rates are standardized as an annual percentage rate, or APR, so cardholders can easily compare what companies have to offer.

J

Joint Account

With joint accounts, both parties' finances are considered for approval purposes. Both parties can use account funds, and both parties are 100% liable for the debt.

Joint Credit

When two or more people share credit, it is termed joint credit. The credit report will contain all the income and credit history for both or all people listed together. All those listed on a joint credit account are responsible to repay the debt.

K

Knuckle-Buster

Sometimes referred to as a zip-zap machine, and rarely used anymore, if at all, it is a manual credit card machine that imprints the card number on carbon paper. The merchant has to slide the imprinter over the card somewhat forcefully, hence the knuckle-buster name.

L

Late Payment Fee

The fee charged for not paying at least the minimum credit card payment by the due date.

Linked Transfer Account

A linked transfer account is when one bank account is connected to another at the same bank. It is often used as a backup to cover for overdrafts and can be a savings or a credit card account.

M

Magnetic Stripe

The magnetic stripe is the brown strip on the back of a plastic credit or debit card. The stripe contains encoded data about the cardholder's account, including credit card number, holder's name, expiration date and country of issue, that can be read by the credit card reader when the card is swiped.

Making a Budget

Making a budget involves determining which expenses are recurring and occasional over a certain period of time, listing them and then allotting a certain amount of money for each expense.

Margin

The difference between a prime rate and a variable rate is the margin. So, for example, if the prime rate is 3% and the variable interest rate is 13%, the margin is 10%. Margins must be disclosed at the time of issue and on every monthly statement. See Prime Rate and Variable Interest Rate.

Mastercard

Mastercard is a public, worldwide credit card company. Brands and products include Maestro, Cirrus and Mastercard PayPass. Mastercard partners with financial institutions that issue credit cards and with the merchants that accept those cards.

Merchant

A business or organization that has contracted with a credit card company so it can accept and process credit card transactions.

Minimum Finance Charge

A minimum finance charge comes into play when there is a minimal balance on your credit card during the billing cycle. It could be as little as $.50.

Minimum Payment

The minimum payment is the least amount of money you are required to pay on your monthly credit card balance. It is based on a percentage of your balance.

Monthly Payment

The monthly payment is the amount that must meet the minimum requirements and is first applied to interest charges before the principal amount owed.

N

National Foundation for Credit Counseling (NFCC)

Founded in 1951 and headquartered in Maryland, the NFCC is an American nonprofit organization that provides counseling services for consumers.

New Charges

New charges are treated separately from a current balance and are not interest-bearing until a specified time period has passed.

O

Ongoing Rate

Also called a "go-to rate," the ongoing rate is the regular rate after any introductory or teaser rates have expired.

Online Bill Pay

Most credit cards can be paid online once a credit card is registered and a bank account has been linked and approved for payment transactions.

Open-Loop

Cards such as American Express, Discover, Mastercard or Visa logo that can be used wherever those cards are accepted are open-loop cards. See Closed-Loop.

Opt Out

Under the Credit CARD Act of 2009, consumers have the right to opt out of changes made to their existing credit card accounts including interest rate increases, fee increases and other significant changes in terms. Notice of the changes must be given 45 days in advance so consumers can make a decision to accept or opt out of the agreement based on the changes.

Outstanding Balance

The balance due after any monthly payments have been applied. See Balance.

Overdraft

When money is withdrawn from a bank account and results in a negative balance, an overdraft has occurred.

Overdraft Protection

A bank account or credit card can be linked to another account to be a backup for an account that could be overdrawn, this is overdraft protection.

Over-the-Limit Fee

When your credit card balance is over the maximum amount you can use, you may be charged an over-the-limit fee.

P

Payment Due Date

Payment due dates are usually the same day of the month but can fluctuate according to how many days are in the month. This is when the minimum payment is due.

Payment History

Your credit score is directly affected by your payment history. Credit bureaus track payment history so potential lenders can make an educated decision on whether or not to approve a loan.

Penalty APR

A penalty APR, or default APR, is imposed if certain terms and agreements are broken by the credit cardholder, i.e., late or missed payments. The penalty APR may be reversed after six months of on-time payments. See Annual Percentage Rate (APR).

Periodic Interest Rate

The periodic interest rate is when the interest is assessed on a loan or investment over a set time period and the calculation of interest occurs more than once per year.

Piggybacking

Getting added as an authorized user on someone else's credit card to help improve your credit score is called piggybacking. See Authorized User.

PIN number

A Personal Identification Number is usually a 4-digit pin that is a unique identifier for the credit card company to authenticate the cardholder or access a cash withdrawal through an ATM.

Premium Card

Those with high or excellent credit scores and high income are offered premium credit cards that have perks not found with regular credit cards. See High-End Rewards Card.

Prepaid Card

Prepaid credit cards are actually debit cards, but you can use them at the point of sale like a credit card. They need to be purchased with cash before using. Note that these cards are not an extension of credit, so they have zero effect on your credit score. And there are often hidden fees attached, so read the fine print carefully. For more information on prepaid cards, take look at MoneyGeek's article on how prepaid cards work and why you might want one.

Previous Balance

Previous balance refers to the outstanding balance of the prior statement period before new charges are added. See Balance.

Prime Rate

The prime rate is the interest rate at which banks lend to their prime customers or those with stellar credit. It is an index that is 3 percentage points above the federal funds rate set by the Federal Reserve. See Interest Rate.

Proof of Income

Applicants must furnish proof of income when requested. This is usually in the form of tax returns or pay stubs covering a certain period of time.

Promotional Period

A promotional period is used to entice cardholders to apply for or use their credit card by offering special incentives, such as an exceptionally low interest rate for a specified period of time. See Incentives.

R

Receipt

A record of a transaction, in the form of a hard copy or email, verifying the details of a sale.

Recurring Monthly Expenses

Recurring monthly expenses are those that rarely change and occur on a regular basis, i.e., utility bills and loan payments.

Refund

The reversal of a charge, or money back for a purchase.

Regulation Z

Regulation Z is a part of the federal Truth in Lending Act and pertains to the disclosure requirements of credit card issuers regarding the terms and conditions to potential and existing cardholders. See Truth in Lending Act (TILA).

Regulation X

Regulation X refers to the limits on the amount of credit that can be granted to purchasers of securities from securities brokers, dealers, banks and other lending institutions. It is determined by the Federal Reserve Board.

Revolving Balance

A revolving balance is one that fluctuates with purchases and subsequent payments. See Balance.

Rewards Credit Card

Some cards offer rewards based on use, including cash back, gift cards, merchandise or entertainment. Some rewards cards charge an annual fee or a higher interest rate, so be sure the rewards are worth the extra being charged. See Incentives.

Roll Rate

This is a credit industry term used for cardholders who have 30-day delinquencies. These delinquencies roll to become 60-day and then 90+ day delinquencies. The roll rate becomes a percentage, used to predict losses for the credit card company.

S

"Schumer Box"

Named after legislator Charles Schumer, a Schumer Box is the standardized format of an easy-to-read table, or "box," that discloses the rates, fees, terms and conditions of a credit card agreement. This disclosure is required under the Federal Truth in Lending Act (TILA).

Secured Credit Card

Individuals with low credit scores, or "bad" credit, can purchase the use of a credit card with a cash deposit. Some accounts allow 50-100% use of the cash deposit which collects interest. These cards typically charge usury-level, or limited, interest rates. See Interest Rate. Also, take a look at MoneyGeek's quick guide on understanding secured credit cards.

Security Code

The security code is found on the credit card, sometimes as a 3 or 4-digit number on the back or front of the card. This code helps verify authenticity, especially with over-the-phone transactions. Depending on the card, it may be called a CID (American Express), CVV2 (Visa), or CVC2 (Mastercard).

Security Deposit

An amount used to secure a credit card to ensure the issuer that the balance will be paid, often for those with bad or no credit.

Semi-Secured Credit Card

For those with bad or limited credit, semi-secured credit cards can offer cardholders a chance to show they are creditworthy by making their payments on time. Issuers can offer a credit limit beyond the deposit initially required to open the account. See Security Deposit.

Signup Bonus

An incentive to apply for a credit card, signup bonuses could include a monetary credit or another reward that entices an applicant to apply. See Incentives.

Smart Chip

Soft Inquiry

A soft inquiry refers to a lender's request to look at limited information on a potential borrower as a prospect to solicit, perhaps with a direct mail offer. These types of inquiries have no effect on credit score. See Inquiry and Hard Inquiry.

≫ Learn more: Hard Credit Inquiry vs. Soft Credit Inquiry

Soft Pull

Known also as a soft inquiry, it is the credit industry term used to describe a credit report check that does not impact the borrower's credit score. See Hard Pull.

Standard APR

The standard annual percentage rate (APR) aka the "go-to" rate is the regular interest rate charged after any introductory or teaser rates have expired. See Annual Percentage Rate (APR).

Statement

The credit card statement details all the account information for the month or quarter, according to its specified time period, i.e., transactions, finance charges, payments and other account activity.

Statute of Limitations

In the context of credit card lawsuits, the period set by state law during which a credit card debt is still collectible. Once the statute of limitations expires, the creditor can no longer legally pursue payment from a consumer.

Stipulated Judgment

A legally binding agreement between a delinquent debtor and creditor to handle delinquent debt is referred to as a stipulated judgment.

Straight-roller

A delinquent credit card account that "straight rolls" from being current to 30 days late to 60 and 90 days past due because the cardholder does not make any payments. See Roll Rate.

Student Credit Card

The Credit CARD Act of 2009 requires students who want their own credit cards to show proof of income or ability to repay credit card debts. If students do not qualify, a parent, guardian, or another adult can co-sign for them to get a card in their own name. Check out MoneyGeek's Student Credit Cards page for more on this subject. See CARD Act.

Subprime Credit Card

A credit card for those with subprime credit, i.e., bad or little to no credit. These cards often carry additional fees and higher interest rates.

T

Teaser Rate

A lower interest rate than the standard APR offered to cardholders for a specified period of time. After that, standard APRs apply. See Standard APR.

Terms and Conditions

The policies and agreements that cardholders are to follow as set by the credit card company are called the terms and conditions. Acceptance of the terms and conditions begins once a cardholder uses the card. It is essentially a legal contract between the company and the user.

Tiered Rewards

Rewards, or cash back incentives that increase at certain increments or tiers, based on the volume of use on a credit card. See Incentives and Rewards Credit Card.

Tranche

From the French word meaning slice or portion, tranche is an investment term that is defined as a portion of a securitized credit card portfolio.

Transaction Authentication Number (TAN)

The TAN is used by some online banking services as a one-time password to authorize financial transactions.

TransUnion

The third-largest credit card information service. Provides credit information and information management services to approximately 45,000 businesses and approximately 500 million consumers worldwide. See Credit Reporting Agency (CRA).

Travel Rewards

There are credit cards that offer rewards and discounts towards airfare, hotel stays and car rentals. There are those with airline miles and/or hotel points, which accumulate through card usage and can be used toward future flights or stays. Travel reward cards tend to, but not always, have higher interest rates. See Rewards Credit Card. For more information on travel cards, see MoneyGeek's guide to getting the most out of your travel card.

Truth in Lending Act

The TILA of 1968 is a federal law designed to promote the informed use of consumer credit by requiring disclosures about terms and costs associated with borrowing.

Two-Cycle Billing

No longer allowed due to the new rules of the Credit CARD Act of 2009, two-cycle billing was the balance computation method that allowed credit card issuers to apply interest charges to two full cycles of card balances, rather than the most recent billing cycle's balances. See CARD Act.

U

UDAAP

Part of the Dodd-Frank Act, the UDAAP stands for Unfair, Deceptive, or Abusive Acts and Practices. See Dodd-Frank Act.

Unauthorized Credit Card Charges

Any charges to your account that you did not give permission for, often resulting from credit card theft. Unauthorized charges can also result from clerical error or a computer glitch. It is the user's responsibility to report any unauthorized charges in order to avoid becoming responsible for them.

User Authentication

Validating the credit card user's identity or authorized use of the credit card is called user authentication. This is an integral part of a merchant's responsibility when accepting credit cards.

Utilization Rate

Your utilization rate tells lenders how much of your credit you have used versus how much you have available. It is expressed as a ratio and calculates the balances carried to available credit. The lower the ratio, the better. See Balance to Limit Ratio.

V

Variable Interest Rate

Variable rate credit cards are usually tied to the U.S. index, or prime rate. This rate is set by the Federal Reserve and is called the federal funds rate. A variable rate is often shown as an index plus a margin. See Interest Rate and Prime Rate.

Visa Card

Known worldwide, the Visa card is one of the most widely accepted credit cards. Visa partners with banks to issue credit and debit cards.

Void Transaction

A transaction that has been canceled and or deleted.

W

Withdrawal

Cash withdrawn from a credit card from a bank or ATM. See Cash Advance.

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*Rates or fees may vary or include specific stipulations. We recommend visiting the card issuer’s website for the most up-to-date information available.
Advertiser Disclosure: MoneyGeek has partnered with CardRatings for our coverage of credit card products. MoneyGeek and CardRatings may receive a commission from card issuers. To ensure thorough comparisons and reviews, MoneyGeek features products from both paid partners and unaffiliated card issuers that are not paid partners.