First Time Card Holder Glossary

Part of the responsibility of carrying a credit card is educating yourself on the rules and laws surrounding credit card debt.  The more educated you are the easier it will be to avoid the pitfuls of overcharging on your credit cards.  Avoiding using your credit cards in excess will prevent you from finding yourself in a poor financial situation.

Annual Fees

Annual membership or participation fee charged by most credit card companies. On average, the fee ranges from $15 to $55. Some issuers charge no annual fee.

Annual Percentage Rate

The yearly 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.

Card Holder Agreement

Required by the Federal Reserve. It is a written statement that gives the terms and conditions of a card account. It must include the annual fee, formula for minimum payment, Annual Percentage Rate and cardholder's rights in billing disputes 

Charge-Back

A charge-back is a transaction returned through a credit card processing interchange by an issuer to an acquirer. Consumers may, under certain circumstances, dispute a purchase made from a merchant and cause a charge-back. A transaction also may be returned because it was noncompliant with the merchant account rules. Sometimes spelled chargeback.

Credit Line

A credit limit or credit line is the maximum amount of money that can be charged to a credit card account.

Due Date

Credit card bills have a due date. If your credit card payment does not arrive -- and get posted -- by the due date, you will be charged a late fee. It's important for credit cardholders to watch their payment due dates, since they sometimes change. Some credit card issuers allow their customers to set their own due dates.

F - Fixed

If the letter 'F' follows the annual percentage rate (APR), the rate is fixed and not adjustable.

Finance Charge

The finance charge on a credit card is the total cost of borrowing on the account. This includes interest and fees and is shown in a dollar amount.

Grace Period

The period between the date of the credit card billing statement and the date payment in full must be received before interest begins to accrue on new purchases.

Minimum Finance Charge

You will be charged a minimum finance charge if the calculated amount of your finance charge is less than the minimum finance charge set by your credit card company for a billing cycle. For example, your finance charge may be calculated to be $0.35 but if the company's minimum finance charge is $0.50, you'll pay $0.50. A minimum finance charge applies only when you must pay a finance charge -- that is, when you carry over a balance from one billing cycle to the next. Not to be confused with minimum payment.

Minimum Payment

The smallest amount of money paid to keep the account from going into default. Often a minimum of 2% of the outstanding balance.

Over The Limit Fee

Overlimit fee is the amount that is charged to your card if you surpass the amount of credit allowed on your credit card account.

Schumer Box

The Schumer Box is named for the then-chairman of the Senate Banking Committee that passed landmark consumer protection legislation, Sen. Charles Schumer. This standardized disclosure 'box' features relatively consistent terms and conditions for credit card offers, which allows consumers to compare cards in a consistent way. Specific terms and conditions such as purchase and cash advance interest rates, annual fees and rate calculation methods are required to be spelled out for consumers in conjunction with all new account solicitations.

Secured Credit Card

Credit card used by people trying to rebuild their poor credit or by beginners establishing their credit. The cardholder's savings deposit or bank account guarantees payment of the outstanding balance if he defaults on payments. Credit line will represent 50-100% of the security deposit. Many have application and processing fees.

Subprime Credit Card

A credit card designed for those with little credit history or bad credit. These types of bad -credit credit cards typically carry higher fees and interest rates to offset the increased risk involved with subprime lending.

Terms and Conditions

Terms and conditions is the common name for the document in which credit card issuers describe in detail their practices. After a consumer applies for a credit card and receives it in the mail, the first use of the card turns the terms and conditions into a legal contract.

Universal Default

Universal default is a common practice among credit card issuers. It allows credit card issuers to raise the interest rate for any change that indicates risk on a borrower’s profile with any other lender. Even if the borrower makes timely payments and does not go over the limit on that specific card, their interest rate can increase if they are late on another credit card, utilities, car payments, rent or mortgage payments.

Unsecured Credit Cards

Unsecured credit cards are the most common type of credit cards. They are not secured by collateral. That means that unlike secured loans, such as mortgages or auto loans, unsecured credit cards are not directly connected to property that a lender can seize of the cardholder fails to pay. Issuers of unsecured cards must make use of other means -- such as the courts or garnishment -- to collect unpaid debts. Customers qualify for unsecured cards based on their credit history, their financial strength and their earnings potential.

V - Variable

The credit card interest rate is variable and subject to change if the letter 'V' appears after the annual percentage rate.