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Glossary Of Terms

Balance Transfer
If you already have more than one credit card, you can transfer your existing balance from one credit card to another. The second credit card issuer will assume your outstanding balance by paying it off. The second card issuer will then bill you at the new rate. Card issuers often offer low Introductory rates known as Intro APRs (teaser rates) to encourage balance transfers and acquire new customers. Credit card issuers hope that after the Intro APR offer ends, customers will continue using their cards.;



Balance Transfer Fee
Some credit card issuers charge a fee for transferring a balance from another card. Balance transfer fees vary from card to card but it is typically 1-2 percent of the amount being transferred, often the fee cannot exceed a certain dollar amount, for example, 1% of the balance transfer amount but no more than $50. Many balance transfer offers come without fees.;



Basis Point
One-hundredth of a percentage point (0.01%). The difference between 8.04 percent and 8.05 percent is one basis point. Some credit card issuers quote the interest rate on the credit card in terms of basis points. 100 basis points equal 1 percent.;



Billing Cycle
It is the length of time between billing statements. Most credit cards have a billing cycle of 22-28 days;



Billing Statement
Each billing cycle (usually once per month), your card issuer will send you a statement. The statement will detail the activity on your account including purchases, balance transfers, cash advances, payments, credits and finance charges. The statement will also show applicable APRs for each transaction type. Important changes to a credit card account are often included in small-print fliers (statement inserts) that are sent with the statement.;



Business Card (Business Credit Card)
A Business credit card is a card issued to executives of businesses, which allows them to make purchases or obtain cash advances. The cumulative credit limit is assigned to a particular business and not an individual. All authorized employees can use the business card but the employer bears the financial responsibity and therefore it does not have a bearing on employee’s credit rating.;



Cardholder Agreement
The cardholder agreement describes all the terms and conditions of a credit card account. The cardholder agreement is required by Federal Reserve regulations. It must include the Annual Percentage Rate, the monthly minimum payment formula, annual fee if applicable, any other fees, and the cardholder"s rights in billing disputes. Changes in the cardholder agreement may be made, with written advance notice, at any time by the issuer.;



Cash Advance
You can use your card at a bank or an ATM to obtain a cash loan. The interest rate for a cash advance is typically much higher than it is for purchases, and there is usually no grace period. There can also be a service fee for withdrawing cash in addition to the interest charges, which can raise the cost significantly.;



Cash Advance Fee
A service fee for using the credit card to obtain a cash advance. This fee can be stated in terms of a flat, per-transaction fee or a percentage of the amount of the cash advance. Depending on the bank issuing the card, the cash advance fee may be deducted directly from the cash advance at the time the money is received or it may be posted to your statement as of the day you received the advance.;



Charge Card
A charge card requires you to pay your bill in full each month, but charges no interest unlike a credit card, which gives borrowers a revolving line of credit and lets them borrow against it.;



Chip Card
A smart card, a type of chip card, is a plastic card embedded with a computer chip that stores and transacts data between users. This data is associated with value or information or both and is stored and processed within the card’s chip, either a memory or microprocessor. The card data is transacted via a reader that is part of a computing system. Smart card-enhanced systems are in use today throughout several key applications, including healthcare, banking, entertainment and transportation. In a credit card, this can provide an increased level of security compared to the normal credit card that has a magnetic stripe.;



Co-Branded Cards
Co-branded cards are credit cards issued by financial institutions such as banks, which have partnered with a popular brand for the purpose of offering some exclusive benefits to their card members. The card would have two brand names on it – the bank"s name and the store"s name. Usually, the attraction of the card is special deals from the retail partner. Many, particularly the ones affiliated with airlines offering air miles, are popular enough to command a hefty annual fee;



Co-Branded Cards
Co-branded cards are credit cards issued by financial institutions such as banks, which have partnered with a popular brand for the purpose of offering some exclusive benefits to their card members. The card would have two brand names on it – the bank"s name and the store"s name. Usually, the attraction of the card is special deals from the retail partner. Many, particularly the ones affiliated with airlines offering air miles, are popular enough to command a hefty annual fee.;



Corporate Card
Charge card designed for business-related expenses, such as travel and entertainment. Holding a separate card provides convenience to both the user as well as the Corporation to maintain separate transactions for personal and business expenses. The Corporation can also set limits for spending. A Corporate Card is also used by the Corporation for making repetitive, low-value purchases, thereby reducing transaction costs. (See Purchasing Card) (or Procurement Card??);



Credit Card
A plastic card with a coded magnetic strip that entitles its bearer to a revolving line of credit. Credit limit and interest rate are determined by the issuer based on the creditworthiness of the applicant. A credit card allows individuals and businesses to make purchases, access cash and pay off debt over time. If a credit card balance is paid off in full by the due date, the issuer collects no interest changes.;



Credit History
Credit History is a record of an individual"s or business’ current and fully repaid debts including credit card debts. Credit history helps a card issuer or other lenders to determine whether you have made payments in a timely manner and whether you have any judgments against you or bankruptcies on your file. Creditors may obtain your credit history from their internal records or/and from Credit Reporting Agencies, also known as credit bureaus;



Credit Insurance
A policy that covers you if you are unable to pay your credit card bills due to illness, unemployment, or other severe conditions. Under these circumstances, the insurance provider will pay your minimum payments. The structure of protection for revolving credit card debt is calculated each month to cover only the debt that existed at the last billing cycle. Please be advised that terms and conditions of each credit insurance policy may vary from provider to provider and you should always ensure that they meet your needs.;



Credit Limit
Your credit limit is the maximum amount you may charge on a single credit card. The amount that stands charged at any instance, based on your transactions, is set off against the limit to determine available credit. Many banks will allow you to spend more than your credit limit, but may charge you an over the limit fee for doing so.;



The maximum amount of credit one can use at any time, based on income, debt and credit history. Your credit line is the cumulative credit you can borrow from all your credit cards.
The maximum amount of credit one can use at any time, based on income, debt and credit history. Your credit line is the cumulative credit you can borrow from all your credit cards.;



Credit Report
A report that contains details of your credit history plus additional facts about you, including your address, salary, employment history and other details. Lenders use it to determine whether to approve a loan and on what terms. A credit report includes a record of any card that you hold now, have held in the past, and for which you have applied.;



Credit Reporting Agency (CRA)
Credit Reporting Agencies, also know as credit bureaus, collect and store information about your credit history. Creditors use the information from CRAs, to evaluate your creditworthiness when considering your application for credit. CRAs report on how individuals manage their debts and make payments, how much untapped credit they have available and whether they have applied for any loans. The three major national CRAs are Equifax, Experian (formerly TRW) and TransUnion.;



Credit Score
Credit Score is a numerical representation of your credit risk. Your credit score is based on the information contained in your credit report. Financial institutions often use credit scores to help determine your creditworthiness for credit card approvals. Credit score is usually expressed as a FICO (see FICO).;



Creditworthiness
Your credit history and ability to service debt. It judges whether you are qualified to have credit. This is used to determine risk for the lender;



Debit Card
This card allows you to deduct the amount of your purchase directly from your checking account for payment to the merchant. Some cards require a personal identification number (PIN). Others require a customer"s signature. A PIN-based or direct debit card collects the purchase amount from a customer"s checking account almost immediately. A signature-based or deferred debit card collects the purchase amount in two to three days.;



Debt Consolidation
The consolidation of all credit card debts into a single debt, often with a lower monthly payment, and a lower interest rate. Many organizations offer credit card debt consolidation services. By consolidating your credit card debt, you still hold all your credit cards but pay a single monthly payment instead of paying to all the different credit card issuers.;



Debt-to-Income Ratio
A widely used measure of financial stability, your debt-to-income ratio is calculated by dividing monthly minimum debt payments (including credit card debts) by monthly gross income.;



Delinquency Rate
Delinquency rate is also known as Penalty rate. If you have two or more late payments (see Late Payment), your credit card issuer may charge you a delinquency rate, which is much higher than the card’s current annual percentage rate. On some cards, a single late payment triggers a delinquency rate.;



Diners Club®
Diners Club is a branded charge card. There are a wide variety of special privileges offered to the Diners Club cardholder. Besides, the card has its own merchant establishment tie-ups and does not depend on the network of MasterCard or Visa. As this card is typically meant for high-income group categories, it may not be acceptable at many outlets. The tariff charged to the merchants would be generally higher compared to Master and Visa credit cards.;



Discover®
Discover is one of the well-known credit cards. This card has its own merchant establishment tie-ups and does not depend on the network of Master Card or Visa. There are a wide variety of special privileges offered to Discover cardholders;



EFT
Electronic funds transfer. The transfer of money between accounts by consumer electronic systems such as automated teller machines (ATMs) and electronic payment of bills.;



Equifax
One of the three national Credit Reporting Agencies, along with Experian and TransUnion. Business information providers like Equifax collect and organize information about an individual"s credit and payment habits. The information is available in the form of an Equifax credit report.;



Experian
One of the three national Credit Reporting Agencies along with Equifax and TransUnion. Business information providers like Experian collect and organize information about an individual"s credit and payment habits. The information is available in the form of an Experian credit report.;



Extended Warranty
Prominent credit card issuers sometimes offer extended warranty on specific products purchased using their cards. This extended warranty could well increase the manufacturer’s new product warranty by up to one year. American Express, for example, covers some purchases like personal computers under its Buyer’s Assurance Plan.;



Fair Credit Reporting Act
The U.S. Fair Credit Reporting Act seeks to achieve fair, timely and accurate reporting of credit information by regulating the activities of the Credit Reporting Agencies, Under the Fair Credit Reporting Act, you have the right to see the credit history maintained by the Credit Reporting Agencies..;



Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act restricts the practices debt collection agencies may use to try to obtain payments from debtors (including credit card debts). This federal law limits the harassment techniques (often used in the past) by such agencies.;



FICO
– Fair, Isaac and Company. The FICO score is a numerical value ranging from approximately 300 to 900 (900 being the best). Fair, Isaac and Company developed FICO scoring system and named it after their company. FICO scores are now widely used by lenders to forecast the borrowers’ level of risk associated with a particular loan. An excellent FICO score does not guarantee an approval for a loan. However, individuals with very good credit are deemed less risky and therefore have easier access to credit and lower interest rates. Lenders obtain FICO scores from the three national Credit Reporting Agencies: Equifax, Experian, and TransUnion.;



Finance Charge
The price paid to a lender for the use of borrowed money. Interest is charged as a percentage of your outstanding balance. For example, purchases, balance transfers, cash advances and other charges reduced by payments or credits posted. Please note that finance charges for cash advances may start accruing from the day of the transaction as opposed to purchases where finance charges accrue only on the amount unpaid by the statement’s due date.;



Fixed Rate
Credit card companies use two kinds of interest rates in calculating finance charges on your credit card account. A fixed rate or fixed APR (see APR) that does not change in response to interest rate changes and conditions and a Variable Rate that periodically goes up or down based on fluctuations in market interest rates as reflected in a published index.;



Floor Rate
The lowest possible Variable Rate (see Variable Rate) that can be reached for the credit card, after any initial introductory rate period. Generally, the Prime Rate (see Prime Rate) serves as an index for the Variable Rate. No matter how low the Prime Rate drops, the Variable Rate on the credit card account may never decrease below the stated floor rate. This is the minimum level set for the interest rate on the card.;



Gift Card
Many organizations and credit card companies issue gift cards that can be used like a credit or check card for purchases up to the Gift Card amount. It is like a gift certificate. If the Gift Card is lost or stolen, the unspent amount can be replaced. It can be used immediately after activation and is accepted wherever the issuer’s credit card is accepted.;



Grace Period
This is the period of time, usually 20 -25 days, for which the issuer does not charge interest on purchases. For example, if the billing date on your credit card bill is January 1 and you have paid your prior balance in full, you may have until January 25 to pay your new balance in full. If you do so, you will not be charged interest. Some accounts have no grace period, which means interest is charged on purchases from the date they are posted or from the date of the billing statement. Also, you should be aware that most credit cards do not have a grace period for cash advances.;



Gross Income
Gross income is defined as all income from any source, whether or not it is reportable to the Internal Revenue Service. Gross income includes: wages, salaries, earnings, tips, interest and bonuses, Worker’s compensation, Social Security Disability Income and other benefits. It is used as a yardstick by credit card issuers while evaluating your credit card application.;



Household income
This is the total income of all members of a household. It is an important yardstick used by lenders evaluating applications for joint credit (see Joint Credit).;



Identity Theft
Identity theft occurs when someone appropriates your name, social security number, credit card number, or some other piece of your personal information without your knowledge to commit fraud or theft. If you realize this, you should immediately contact your card issuers, any other issuing authority as well as each of the three national Credit Reporting Agencies (Equifax, Experian, TransUnion) to place a fraud alert on your credit file;



Interest Rate
The cost of borrowing credit, usually a percentage of the amount borrowed or loaned. Interest is charged if the amount of credit borrowed from the card is carried over to the next month without paying the balance in full. Interest rates on credit card plans change over time.;



Interest Rate Cap
A limit on how much interest rates can increase or decrease during a single rate adjustment period for variable rates charged on credit card debt.;



Interest Rate Ceiling
The interest rate ceiling is the highest variable rate (see Variable Rate) a credit card issuer can charge its card members. This ceiling applies even if index rates rise significantly and the rate adjustment formula results in a higher rate. The interest rate ceiling is stated in the cardholder agreement (see Card Holder Agreement).;



Intro Rate
Introductory, usually low, interest rate (APR) offered by credit card issuers to "introduce" you to their services. After the introductory period is over, the rate charged increases to the indexed rate or the stated APR.;



Introductory Period (Intro Period)
Credit card issuers often provide a lower interest rate (APR) for newly approved applicants for a certain period of time. This timeframe during which a special intro rate may be in effect is the introductory period. This is often an incentive to sign up new accounts. After the intro period ends, the interest rate will usually increase.;



Issuer
Bank or other financial institution that issues credit cards and bills the customer for transactions made against the card’s account.;



Joint Credit
Two persons can apply for a joint credit card that can be used by either. Joint credit is issued to two persons based on their combined assets, incomes and credit reports. It generally results in a higher credit limit (see Credit Limit), but holds both parties responsible for repaying debt.;



Joint Petition
A bankruptcy petition filed by a husband and wife together. Credit cards are generally unsecured and no property collateral may have been provided. Thus the bankruptcy petition, if approved, would leave the issuer with no option but to wait for proceeds from liquidation or reorganization of debt. At the same time, if the users have run up their credit cards fraudulently with an idea of going bankrupt, it can be considered a crime.;



Late Charge
A fee imposed on a cardholder for not making a minimum payment by the due date. This fee varies from card to card. Late fee may be tiered based on the unpaid balance; the higher the unpaid balance the higher the late fee. Many major issuers charge late fees as high as $45.;



Late Payment
A payment made after the statement’s due date. Your credit report may reflect late payments, and if you have made a habit of paying late, creditors may raise your APR and you may have difficulty obtaining additional credit cards or loans. Most creditors do not report late payments unless they exceed 30 days.;



Late Payment Fee
Credit card issuers charge a fee if late payment (see Late Payment) is made for purchases against the card account. This fee varies from card to card.;



Line of Credit
The maximum amount of credit one can use at any time, based on income, debt and credit history. Your credit line is the cumulative credit you can borrow from all your credit cards.;



MasterCard®
MasterCard, a credit card of MasterCard International, is distributed by issuing financial institutions around the world. MasterCard is one of the most widely used credit cards along with VISA (see VISA). MasterCard has also developed various technologies that are required for running the credit card business.;



Over-the-Limit Fee
A fee charged for exceeding the credit limit on the card. Your card issuer may allow you to exceed your credit limit without telling you in advance, and you may not know you have done so until you receive your bill.;



Penalty Rate
If you have two or more late payments (see Late Payment), your credit card issuer may charge you a Penalty Annual Percentage Rate (APR), which is much higher than the card’s current APR. On some cards, a single late payment triggers a penalty rate.;



Periodic Rate
The periodic rate is the rate you are charged each billing period. Usually the periodic rate is the monthly interest rate, calculated by dividing the card"s APR (see APR) by 12. If your card has different rates for different types of transactions, then different periodic rates will apply to those balances.;



Personal Identification Number (PIN)
A confidential personal identification number (usually 4 to 6 digits) used by cardholders to gain access to their account. PIN is required to perform certain transactions such as cash withdrawals at ATMs. It is used for verification purposes;



Pre-approved
A "pre-approved" credit card offer means that a potential customer has passed the preliminary credit-requirements screening. Pre-approved offers, however, are not a guarantee of credit. Many financial institutions will conduct a "post-screening" process, which typically involves reviewing your credit bureau report in full as well as verifying information provided on your application. The pre-approval process is fairly accurate and approximately 80 to 95 percent of pre-approved applicants receive cards.;



Prime Rate
The Prime Rate is the index used to calculate the interest rate on the cardholder’s account. It is the rate charged by major money center commercial banks to their prime (best) customers. The Wall Street Journal reports an average Prime Rate of the largest commercial banks. Credit card issuers usually determine variable APR by adding the Prime Rate to a certain percentage rate (for example, Prime Rate plus 9.99%). If we assume the Prime Rate to be 4.25%, then the APR would be 14.24% (4.25% plus 9.99%).;



Private Label Cards
A private label card is issued by a retail outlet, such as a department store or gasoline company, and contains the logo of the retailer. These are credit, debit or store-value cards that can be used only within a specific merchant"s store. Retailers partner with a bank or a card-issuing management company to support and manage the operations of these cards.;



Purchase Assurance
Purchase Assurance is a special benefit that states that if an item you"ve purchased in the last 90 days is lost, stolen or damaged, the purchase insurance program ensures that you"s covered toward the cost of replacement or repair of the affected item. There may be per transaction as well as annual limits specified for such protection. There is no special registration required for each purchase. Purchase Assurance is not available for all items. Check with your card issuer to get a list of items that are covered.;



Purchasing Card
A real convenience for businesses, this card eliminates the need for time-consuming purchase orders. A company simply places orders directly with suppliers and charges them to the card. Generally used for purchases of $5,000 or less. (also referred to as a Procurement Card.);



Rebate Card
These cards may offer rebates on merchandise or cash-back offers depending on how much you charge annually. Others have enhancements that offer special benefits, such as frequent-flyer miles or long-distance telephone discounts. When choosing a rebate card, be sure that the rebates the card provides add up to more than the membership fee (if any) and what you might save with a lower interest rate card.;



Redemption
Most cards offer some form of reward or incentive against your spending. The incentive could be in the form of reward points or frequent flyer miles that accrue to your account for each transaction. Redemption is the process to avail the benefit offered against specific levels of points or miles that stand in your account. An application for redemption is required to be made by you specifying the benefit that you wish to avail. Generally, the benefit is in the form of free or discounted merchandise or air travel.;



Remaining Balance
Remaining balance is the unpaid monthly balance on your credit card account.;



Returned or "Bounced" Check Charge
Also referred to as an NSF or non-sufficient funds fee. The amount of money charged to an account holder whose check was returned because of insufficient funds.;



Revolver
A term credit card issuers use for card holders who roll over part of the bill to the next month, instead of paying off the balance in full each month. About seven out of 10 cardholders revolve their debt. You pay interest on the amount revolved.;



Revolving Line of Credit
It is a line of credit (see Credit Line) that may be used repeatedly up to a certain limit. It is an agreement to allow a specific amount for purchases to a cardholder, and to allow that amount to be used again once it has been repaid. Most credit cards offer a revolving line of credit.;



Rewards Program
A point accumulating program based on purchases or transactions made on your credit card. The more you use your credit card for purchases, the more points you accumulate. These points can be redeemed for different kinds of merchandise. Banks may charge annual fees to participate in a rewards program.;



Secured Card
A credit card that a cardholder secures with a savings deposit or other collateral to guarantee the credit card or loan; the limit of credit is based on the amount of collateral available. People new to credit, or people trying to rebuild their poor credit ratings may find secured cards to be an excellent means to establishing or rebuilding credit.;



Simple Interest
Simple interest is interest paid only on the "principal" or the amount originally owed to the credit card company, and not on the interest owed on the credit card debt. For example, the simple interest due at the end of two years on a credit card debt of $100 at a 10% APR is $20 (10% of $100, or $10, for each of the two years). No interest is calculated in the second year on the $10 interest that was due after the first year.;



Smart Cards
A smart card – a type of chip card – is a plastic card embedded with a computer chip that stores and transacts data between users. This data is associated with value, information or both and is stored and processed within the card’s chip, either a memory or microprocessor. The card data is transacted via a reader that is part of a computing system. Smart card-enhanced systems are in use today throughout several key applications, including healthcare, banking, entertainment and transportation. In a credit card, this can provide an increased level of security compared to the normal credit card that has a magnetic stripe.;



Standard Card
This is the basic card offered by issuers. Customers with higher incomes and good credit scores (see Credit Score) can qualify for the higher-limit gold or platinum cards.;



Statement
A credit card statement is the detailed record of transactions of a credit card account for each billing cycle (see Billing Cycle), which shows purchases, transfers, account balance, fees, service charges, ATM activity, etc.;



Sub-Prime Borrower
A borrower with a less-than-perfect credit history (see Credit History) due to late payments or a default on debt payments. Card issuers often grade borrowers based on the severity of past credit problems, with categories ranging from "A” to "D" or lower.;



Transaction Date
The date when goods or services were purchased or the date the cash advance was made. Some companies assess interest on charges and cash advances from the transaction date, others from the date that a transaction is recorded on your account.;



TransUnion
One of the three national Credit Reporting Agencies. Business information providers like TransUnion collect and organize information about an individual"s credit and payment habits. The information is available in the form of a TransUnion credit report.;



Travel Assistance Services
Provides helpful information and facilitation on travel requirements including documentation (visas, passports), immunization or currency exchange rates. Enrollment is automatic for eligible cardholders and the assistance service is free to cardholders.;



Two-cycle Billing
With two-cycle billing, the average daily balance used to calculate interest charges is calculated from two billing cycles rather than one. This method, in effect, wipes out the grace period for customers who carry forward a balance. If the bill is not paid in full at the first billing due date, interest becomes retroactive back to the purchase date. Most credit card issuers use the single-cycle average daily balance method.;



Unauthorized Charges
These are purchases made or cash advances drawn by an unauthorized person using your credit card particulars. You must report all unauthorized charges to your card issuer promptly. You will need to cancel your card if required to do so by your card issuer. Many credit cards do not impose any liability on its card members for unauthorized transactions; this is often called Zero liability on unauthorized transactions.;



Variable Interest Rate
A variable interest rate is based on fluctuating rates in the banking system, such as the prime rate. For example, if on January 1, the prime rate was 6% and your credit card"s variable rate formula was the prime rate plus 9.9%, your interest rate would be 15.9%. This would automatically change when there is a change in the prime rate.;



VISA®
VISA card, a credit card of VISA USA, is distributed by financial institutions around the world. VISA is the most widely accepted credit card in the world. VISA also develops various technologies that are required for running the credit card business.;



Zero Liability
If unauthorized charges appear on your statement, you are protected by the card company’s "Zero Liability" policy, which removes your obligation to pay for those charges. Zero liability is applicable so long as your account is in good standing, you have exercised reasonable care in safeguarding your card, and you have not reported two or more unauthorized events in the past twelve months.;