Credit Card Glossary Terms

For every stage of life, you encounter and learn new things. This is no different when it comes to your credit cards. From first time users of credit cards and college students, to buying a home and getting married, and even if you come across identity theft and bankruptcy, you will need to likely need to learn new information. We created this glossary so you can better understand the terms and meaning of each stage of life in regards to your credit cards. Use this resource so you can better understand how your credit cards will be affect with for every stage of life.


Additional Cardholder

When you have a credit card, it is often possible to add an additional card to the account for use by someone else. The main cardholder remains responsible for making payments on all charges made, whether by the original cardholder or the additional cardholder.

Additional Cards

Cards issued on an account not in the primary or secondary name. Additional cardholders are authorized to charge to the card and make payments. They can also check the balance and available credit on the account. Additional cardholders are not authorized to make changes to the account.

Adjusted Balance

Offered by a non-lending institution and a non-financial group (ex. non-profit organizations, universities, airlines or celebrities). Typically, the organization solicits all of its members and affinity card gives holders special discount or deals from the non-financial group. The organization receives brand loyalty from the card users and a small percentage or fee from the credit card company.

Affinity Card

Offered by a non-lending institution and a non-financial group (ex. non-profit organizations, universities, airlines or celebrities). Typically, the organization solicits all of its members and affinity card gives holders special discount or deals from the non-financial group. The organization receives brand loyalty from the card users and a small percentage or fee from the credit card company.

Air Miles

A popular reward program by co-branded cards. Air miles are earned with every use of the card and transferred to the cardholder's account with that airline.

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.


The approval by the credit card issuer for a merchant or another affiliate to complete a credit card transaction.

Authorized User

A person given permission to use a credit card account.

Automatic Payment

Automatic payment is a process that authorizes regular withdrawals to be made from checking or other deposit account to pay credit card and other bills.

Available Credit

The available credit on a credit card is the amount of money that can be charged on a specific credit card without going over the limit. It is the difference between the credit limit and the outstanding charges on the account. For example, if you have a balance of $100 on a credit card and your limit is $150; your available credit is $50.

Average Daily Balance

Most widely used balance calculation. Credits your account from the day payment is received by the credit card company. Calculated by adding each day's daily balance then divide that total by the number of days in a billing cycle. The average daily balance is then multiplied by a card's monthly periodic rate (divide the annual percentage rate by 12). Depending on the details of your plan, new purchases may or may not be added to the balance, cash advances are usually included. The new daily balances are added for the billing cycle.


An outstanding amount of money. A checking or savings account balance refers to the amount of money in a particular account. A credit card balance refers to the amount owed. See also Outstanding Balance.

Balance Transfer

A balance transfer occurs when an outstanding balance on one credit card is moved to another credit card account. This will be done by consumers when they are looking to save money on interest rates by moving their credit card balance to another card with a lower annual percentage rate. Many credit card issuers will offer low introductory interest rates to attract new customers. However, there are typically fees due along with balance transfers and introductory rates typically last for a few months to a year.

Balance Transfer Fee

A balance transfer fee is a fee charged by a credit card company to transfer a balance from one account to another. This fee can be anywhere from 1 percent to 5 percent of the balance amount. The fee may or may not have a cap -- in other words, a maximum amount. Contact the credit card issuer for their specific fees.

Balance-to-Limit Ratio

Balance-to-limit ratio is used in the calculation of credit scores. It compares the amount of credit being used to the total credt available to the borrower. Having a low ratio -- in other words, not much debt but a lot of available credit -- is good for your credit score. Also known as a credit utilization ratio.


An institution that acts as a financial intermediary by receiving money from depositors and lenders and also lending to borrowers. A bank must be chartered and meet certain criteria. Chartering is done by the Comptroller of the Currency for national banks, by the Federal Reserve System for state member banks, by the Federal Deposit Insurance Corporation (FDIC) for insured banks, and by state regulatory agencies.

Bank Holding Company

A company that owns or controls one or more banks or companies associated with banking such as leasing companies, credit companies, etc. It is usually identified by the word Bancorp or Bancshares in the name


If you are absolutely unable to pay your debts, this is the last resort for filing for financial protection. Each plan must be filed in federal bankruptcy court. Individuals who follow the bankruptcy rules receive a discharge- a court order that says they don't have to repay certain debts.

Bankruptcy Trustee

A private individual or corporation appointed in all Chapter 7, Chapter 12, and Chapter 13 cases to represent the interests of the bankruptcy estate and the debtor's creditors.

Basis Point

One one-hundredth of a percentage point. The difference between 7.04 percent and 7.05 percent is one basis point.

Billing Cycle

The number of days in the billing period. It includes the day after the previous close date through the current closing date of the account.

Billing Period

The number of days between the last statement date and the current statement date.

Billing Statement

The monthly bill you receive from the credit card company. Includes summary of all account activity including purchases, payment, credit limit, available credit and finance charges. Monitor the reverse side of the credit card statement and the small-print fliers for important information or changes to your credit card account


One who gets a loan

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 

Cardholder Agreement

The Cardholder Agreement details the Terms and Conditions of your credit card account and includes information such as the rate, fees and other cost information associated with the account.

Cash Advance

A cash advance is a cash loan from a credit card, using an ATM, a bank withdrawal or 'convenience' checks. Credit card cash advances have many disadvantages for consumers. Generally, you cannot take a cash advance for the full amount of your available credit. The interest rate on cash advances is often significantly higher than it is on purchases or balance transfers. If you carry balancnes with both high-interest cash advances and low-interest purchases on the same card, it is current industry practice to apply payments to the low-rate balance first, increasing total interest rate costs. A transaction fee, which is a percentage of the cash advance, is usually charged. There is typically no grace period for cash advances.

Cash Advance Check

A cash advance check works like a personal check except the amount is charged to your credit card account. This check can be written to your choice of recipients and for any amount up to your available credit limit. These types of checks are posted as cash advances and will accrue Finance Charges from the date the Cash Advance is made - there is no grace period for Cash Advances.

Cash Advance Fee

Credit cards give a cash advance limit to obtain cash but this comes with a fee. The checks that come attached to your monthly statement are also a cash advance. The fee can be a per-transaction fee or a percentage of the cash advance. The cash advance fee is costly because there is no grace period and the interest accrues as soon as the money is withdrawn. Usually 2-5% of the money advanced.

Cash Advance Transaction Finance Charge

A fee assessed on the date a new cash advance transaction is posted to an account.

Cash Cards

Cards with a pre-established value. Read by a special cash card reader. The card is drawn down until the value is zero. Beware that these are like cash with no built in security if they are lost are stolen.

Cash Rebates

This credit card allows the user to earn cash 'rewards' with each purchase. Companies make money not only through annual fees and finance charges but also from each purchase you make. They typically receive between 1-3% of your purchase. A cash rebate will return some of that fee to your pocket.


A warning or caution.

Chapter 11 Bankruptcy

Chapter 11 bankruptcy is a legal procedure that allows businesses to reorganize under a court-approved plan. Chapter 11 bankruptcy allows business entities protection from creditors during the reorganization period.

Chapter 13 Bankruptcy

Under Chapter 13 bankruptcy, a creditor repays debts under a three- to five-year plan that is supervised by the bankruptcy court. Chapter 13 bankruptcy was encouraged by the 2005 revision to bankruptcy law, which sought to force more debtors to repay debts.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common type of bankruptcy filing for individuals who can no longer pay their bills. While this legal procedure allows debt to be discharged, it is ruinous to credit records, meaning that future loans will be very expensive, if they can be found at all.

Charge Card

A charge card is a means of obtaining a very short term (usually around 1 month) loan for a purchase. It is similar to a credit card, except that the contract with the card issuer requires that the cardholder must each month pay charges made to it in full -- there is no 'minimum payment' other than the full balance. Since there is no loan, there is no official interest. A partial payment (or no payment) results in a severe late fee (as much as 5% of the balance) and the possible restriction of future transactions or even cancellation of the card.

In contrast, a credit card is a revolving credit instrument which does not need to be paid off in full; no late fee is charged as long as the minimum payment is made, which carries a balance forward as a loan charging interest. Many people are not aware of this distinction however, and often the two terms are used interchangeably to describe any card which can be used as payment.

Charge Off

Term used to indicate that a creditor does not expect a debt to be paid and is listing it as such. This does not mean that the debt no longer exists or that there will not be further attempts to collect it.


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.

Charge-Back Period

The charge-back period is the number of days, from the transaction's processing date or endorsement date, during which the issuer may initiate a charge-back.

Closed-Account Fee

Fee for shutting down an account. Possibly charged if the account is closed before a minimum amount of time has passed.

Co-branded Cards

Credit card issued in partnership between a bank and another retail company. Similar to an affinity card. Many departments offer co-branded cards with special deals or discounts on purchases at their store. Co-branded cards often come with a large annual fee. 


A joint signer of a credit card application with the principal applicant. Should the principal applicant default on what he owes, the co-singer is responsible for paying the balance due.


A credit card issuer will move a credit card balance to an internal or external collections agency if there is a past-due amount on a credit card that must be repaid. When a balance is in collections, this will damage a person’s credit score and make it difficult to borrow either on other credit cards or bank loans without having higher interest rates.

Commercial Bank

A financial institution that provides a broad range of services, from checking and savings accounts to business loans and credit cards.

Consumer Cedit File

A consumer credit file is the collection of an individual consumer's debt repayment records, stored at a credit reporting agency (credit bureau). Credit scores are based on consumer credit files, and determine whether an individual will get a credit card or other loan, and at what rate.

Consumer Credit

Loans for personal or household use as opposed to business or commercial lending.

Consumer Credit Counseling Service

Service that analyzes consumer debt and spending. Provides counseling and a plan to work out an achievable budget and debt repayment plan and work with creditors. Helps the consumer pay back debts over time.

Consumer Credit Protection Act

The Consumer Credit Protection Act, passed in 1968, for the first time spelled out basic consumer protections, including Truth in Lending disclosures. It requires creditors to state the cost of borrowing in understandable terms to allow consumers to figure out how much loans would cost, and to compare them.

Consumer Debts

Debts incurred for personal, as opposed to business, needs.

Convenience Checks

Convenience checks are checks linked to your credit line that can be used just like checks linked to your checking account. Convenience checks can be made in any amount, as long as it does not surpass your credit limit. They are treated like a cash advance, meaning there is no grace period and interest is charged from the moment the check is used. They also tend to have higher interest rates than that charged for purchases.


Money that a lender gives to a borrower on condition of repayment over a certain period.

Credit Bureau

A company that collects and sells information about how people handle credit. It issues credit reports that list how individuals manage their debts and make payments, how much untapped credit they have available and whether they have applied for any loans. The reports are made available to individuals and to creditors who profess to have a legitimate need for the information. The three major national credit bureaus are Equifax, Experian (formerly TRW) and Trans Union.

Credit Card

A plastic card with a coded magnetic stripe that entitles the holder to a line of credit. The amount of credit and the interest rate are determined by the borrower's income and credit history as reported by the credit report.

Credit Freeze

A credit freeze is a service available to consumers through the credit bureaus in which consumers lock down their credit, preventing new accounts from being opened. It is a useful tool in cases where identity theft has been detected or is suspected. The credit bureaus charge fees for establishing credit freezes unless identity theft has occurred. They also charge for 'thawing' the credit freeze, should a consumer decide to open a new account.

Credit History

A record of a person's debt payments.

Credit Inquiry

A credit inquiry is created when a lender pulls someone's credit record. It creates a record in a credit report of each time the borrower, a lender or a potential lender obtains a copy of the consumer's credit report. Credit inquiries, especially multiple inquries, may negatively impact credit scores. See hard inquiry and soft inquiry.

Credit Insurance

Insurance that pays off the credit card debt should the borrower lose his job, die or become disabled. The payoff is calculated monthly to only cover the debt that was recorded on the last billing cycle.

Credit Life Insurance

A type of life insurance that helps repay the loan if the consumer becomes disabled. It is optional coverage. When taken out, the cost of the policy is sometimes rolled into the loan principal amount.

Credit Limit

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

Credit Line

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

Credit Monitoring Service

A credit monitoring service is one that monitors credit card accounts for suspicious or out-of-pattern activity and sends an alert to the cardholder if such activities occur. Typically there is an annual or monthly fee for the service billed to the primary card being monitored.

Credit Rating

A judgment of someone's ability to repay debts, based on current and projected income and history of payment of past debts. Sometimes expressed as a number called a credit score

Credit Report

If you have ever applied for a credit card, a personal loan, or insurance, there is a file about you. This file includes where you work and live, how you pay your bills. It even includes whether you have been sued, arrested, or filed for bankruptcy.
Credit Reporting Agencies gather and sell this information to creditors, employers, insurers and other businesses. Periodically check your credit report for accuracy to know what has been reported and correct any errors. To check on your credit report contact the three major national credit bureaus: Equifax, Experian and Trans Union.

Credit Reporting Agency

A company that compiles credit activity into a credit report. This file includes where you work and live, how you pay your bills. It even includes whether you have been sued, arrested, or filed for bankruptcy. These reports are available to individuals and lenders who have a valid need for the information. The three major credit bureaus are Equifax, Experian and Trans Union.

Credit Score

A credit score is a three digits number that summarizes how well a person or business has handled debt. Higher numbers indicate a better credit rating and allow for larger loans and better interest rates. Low numbers will indicate a worse credit rating and therefore borrowers will have terms with higher interest rates, less amounts available to borrow and may be turned down for loans or lines of credit. Though there are a variety of indicators of credit, the best known and most widely used system is the Fair Isaac Corp. (FICO) product.

Credit Scoring

Scoring system used by creditors to determine if you are a good risk for credit cards, auto loans and home mortgages. Analyzes data from your credit application and credit report about your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt and the age of your accounts. It treats all applicants objectively by comparing your credit information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. The lower your score, the higher your interest rate will be.

Credit Scoring System

A numerical system designed to measure the likelihood that a borrower will repay a debt created by assigning scores to various characteristics connected to creditworthiness.

Credit Union

A nonprofit, cooperative financial institution owned and controlled by the people who use its services, usually a group such as employees in the same company or industry. Credit unions historically have been able to offer lower rates and fees and still operate in the black. Credit unions rely on a financial reserve to absorb unexpected losses from loan defaults or other financial setbacks, and the majority of credit unions carry federal deposit insurance that protects individual accounts up to a specified amount in the event the credit union fails.

Credit Utilization Ratio

A credit utilization ratio is used in the calculation of credit scores. It compares the amount of credit being used to the total credit available to the borrower. Having a low ratio -- in other words, not much debt but a lot of available credit -- is good for your credit score. Also known as a balance-to-limit ratio.


A creditor is the issuer of the credit card or line of credit. The creditor sets the terms and agreements of the card and enforces the terms and agreements of the contract.

Debit Card

Looks like a credit card but issued by your bank. Charges are drawn directly from the cardholder's account, typically a checking or savings account. The withdrawal of funds is immediate with online debit cards, delayed a day or two with offline debit cards. Cards with MasterCard or Visa logo can be used at any location that takes MasterCard of Visa credit cards.


Money one person or firm owes to another person or firm.

Debt Consolidation

Debt consolidations is when multiple loans are combined into a new, single loan that offers a lower monthly interest rate and payment, or a longer repayment period. Many times, consumers will consolidate debt by transferring multiple balances of several high-interest rate credit cards on to a single, lower interest credit card account.

Debt-to-Income Ratio

The percentage of before-tax earnings that are spent to pay off loans for obligations such as auto loans, student loans and credit card balances. Lenders look at two ratios. The front-end ratio is the percentage of monthly before-tax earnings that are spent on house payments (including principal, interest, taxes and insurance). In the back-end ratio, the borrower's other debts are factored in


Technically, a person who has filed a petition for relief under the bankruptcy laws. More generally, anyone who owes.


Default is to fail to make the minimal payment on a credit card by the due date. If this occurs, credit card issuers may raise interest rates to the default rate, decrease the line of credit, or send the balance to collections. Depending on the creditor, a credit card will not typically be place in collections until a payment is 3 to 6 months delinquent. In situations of serious delinquency, the creditor may take legal action or garnish wages to enforce repayment.

Default APR or Penalty Rate

If a payment is made late on a credit card balance, the standard APR that was set at the beginning of the contract may increase to the default APR or penalty rate. This is typically much higher than the original APR. The default APR may be applied to all outstanding balances on the credit card account.

Delinquency Rates

Some cards with low rates for on-time payments apply a very high APR if you are late a certain number of times during a specified period. Look at your credit card application for these special delinquency rates because these can sometimes exceed 20%.

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.

Electronic Funds Transfer

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


A method for ensuring the privacy and security of a consumer's personal finance information at a bank or financial institution Web site. Encryption is the process of scrambling data so that only the intended receiver can use it. To be effective, encryption needs to be used by both the sender and the receiver. Consumers should make sure it is being used when sending sensitive information.

Equal Credit Opportunity Act

A federal law that prohibits discrimination in credit transactions on the basis of race, color, religion, national origin, sex, marital status, age, source of income or the exercise of any right under the Consumer Credit Protection Act.


One of the Big Three credit bureaus, along with Experian and Trans Union.


One of the Big Three credit bureaus, along with Equifax and Trans Union.

F - Fixed

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

Fair Credit Billing Act

Federal Trade Commission Act to help customers resolve billing disputes with card issuers and limit consumer liability for unauthorized credit card use. The act was written to promote accuracy and ensure the privacy of information used in consumer reports. You have the right to know everything that is in your report. The Credit Reporting Agency must also give you a list of everyone who has requested your report in the past year, the past 2 years if it was for employment inquiry.

Fair Credit Reporting Act

Federal Trade Commission Act holds credit reporting agencies responsible for correcting inaccurate information in credit reporting. Entities that give information to the Credit Reporting Agencies are required by the FCRA to provide accurate information. Also limits disclosure of consumer credit reports only to entities with specified purpose.

Fair Debt Collection Practices Act

A federal law that prohibits certain methods of debt collection, such as harassment.

FICO Score

The software used to calculate a great number of credit scores was created by Fair Isaac Corporation--FICO.


An individual, company or association responsible for managing someone else's assets. Fiduciaries include executors of wills and estates, trustees, receivers in bankruptcy and those responsible for managing the finances of a minor.

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.


When a cardholder makes a purchase or obtains an advance, the transactions may not post for a few days. The charge amount is not added to the balance of the account until the transaction does post. The time between purchase and posting is referred to as the float.


The minimum rate possible on a variable-rate loan or line of credit, after any initial introductory rate period. For example, on a credit card with the Prime rate as its index, no matter how low the Prime rate drops, the rate on the line may never decrease below the stated rate floor.

Foreign Currency Surcharge

Charge by some credit card dealers that adds an additional charge for purchases made in a foreign currency.

Foreign Transaction Fee

Foreign transaction fees are charged by most credit card companies on purchases made in a foreign currency, or on purchases that involve a foreign bank (regardless of whether a foreign currency is used). Usually, foreign exchange fees are a percentage of the amount of each foreign currency purchase, with no minimum or maximum. Sometimes this fee is called a foreign exchange fee. It once was called a currency conversion fee. Foreign transaction fees are charged by U.S. transaction processors such as Visa and MasterCard. The card issuing bank may choose to pass that fee along to consumers; most do, and some tack on their own fees.

Fraud Alert

A fraud alert is a security alert placed on a credit card account or credit bureau listing by either the customer or the issuer when a fraudulent account activity is either experienced or suspected. Fraud alerts are also known as credit freezes.

Fraudulent User

A fraudulent user is an individual who is not the credit cardholder or designee and who uses a credit card account to obtain goods or services without the cardholder's consent.

Free Period

Also called 'grace period.' An interest-free period of time a lender gives between the transaction date and billing date, if there is no balance carried over from the previous billing cycle. Generally, the free period is between 20-30 days. If your card includes a free period, the issuer must mail your bill at least 14 days before the due date so you have enough time to pay. People who carry a balance on their cards do not receive a grace period and finance charges begin the date a purchase is made with a credit card.

Gold Card

Offers a larger line of credit that a standard card. Credit line is usually between $2,000-$5,000. Income requirements are higher, typically $35,000 at minimum. Gold card users receive extra perks and incentives such as travel service, rental card insurance and insurance for purchases.

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.

Hard Inquiry

Hard inquiry is a credit scoring term. It describes when a consumer has applied for a loan. The potential lender checks the consumer's credit report, which creates a small negative impact on the consumer's credit score. An occasional hard inquiry, or a quick burst of hard inquiries, have little impact on credit scores; the credit scoring formulas recognize routine loan shopping. What hurts a credit score most are multiple hard inquiries over a long period. A hard inquiry is also known as a 'hard pull.'

Household Income

The total income of all members of a household. An important yardstick used by lenders evaluating applications for joint credit.


Money paid for a borrower?s use of money, calculated as a percentage of the money borrowed and paid over a specified time.

Interest Accrual Rate

Percentage a borrower pays for the use of money, usually expressed as an annual percentage.

Interest Rate

A charge for borrowed money that is generally a percentage of the amount borrowed. It is disclosed as an APR on the credit card form.

Interest Rate Cap

A limit on how much a borrower's percentage rate can increase or decrease at rate adjustment periods and over the life of the loan.

Introductory Rate

The 'teaser' low rate charged by a lender for an initial, temporary period to encourage customers to switch cards. After the introductory period is over, the charged rate increases to the indexed rate or the interest rate.

Issuing Financial Institution

The financial institution that issues a credit card and bills the customer for purchases made against the card account.

Joint Account

A joint account is a bank account equally shared by two or more individuals. Parties involved all share the associated rights and liabilities of the account and are regarded by law as co-owners of the account. This means that if anything happens to the account, such as defaults, overdrafts and fraud, all parties are affected.

Joint Credit

Credit offered to a couple based on both of their assets, incomes and credit reports. The couple usually qualifies for a higher credit limit but both parties are liable for the debt.

Joint Liability

The responsibility of two or more people to repay a debt.

Late charge

A fee imposed on a borrower for not paying on time.

Late payment

A sum a borrower sends to a lender that is received past the date when it was due.

Late Payment Fee

Penalty charged for not paying the monthly payment by the due date or published deadline of payment printed on the billing statement (creditor must receive payment by this date). The fee can be a flat percentage fee or a percentage of the amount of the cash advance.

Linked Transfer Account

A linked transfer account is one in which a consumer's checking account is linked to another account at the same bank. The linked account can be a savings or a credit card account. If a checking overdraft occurs, the bank will transfer money from the customer’s other accounts linked to the checking account.

Merged Credit Report

A summary of one's credit history from the big three credit bureaus: Equifax, Experian and Trans Union.

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.

Monthly Periodic Rate

The interest rate factor used to determine the interest charges on a monthly basis. The yearly rate divided by 12.

National Foundation for Consumer Credit

Non-profit group that educates consumers about using credit.

National Issuers

The overwhelming majority of credit cards in the U.S. come from a handful of national issuers, such as First USA, MBNA America and Bank of America. They often originate from lender-friendly states such as Delaware and South Dakota that impose no limits on what cardholders can be charged.


The National Foundation for Consumer Credit is a nonprofit organization that educates consumers about using credit wisely. The NFCC is the parent group for Consumer Credit Counseling Service.

Non-dischargeable Debt

Non-dischargeable debt is an amount owed that cannot be cleared away by filing for bankruptcy. Examples of such debt vary between Chapter 11 bankruptcy and Chapter 7 bankruptcy. They include items such as family support, unpaid taxes and fines related to criminal charges.

Offline Debit Card

A combination of an ATM and credit card. Contains the MasterCard or VISA logo and can be offered by a bank, either in place of or in addition to an ATM card. After a delay of 24-72 hours, charges are drawn directly from the cardholder's account, typically a checking or savings account. Concluding a transaction by signing a slip of paper indicates the transaction was offline.

Online Bill Presentment and Payment

Online bill presentment and payment is a process that allows consumers to receive, view and pay certain bills online via computer, by transferring money from their checking accounts or charging bills to their credit card. Online bill presentment means that bills arrive online, not by mail.

Open-end Credit

A line of credit that may be used up to a set limit. Also called a charge account or revolving credit.

Original Principal Balance

The amount borrowed.

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.

Overdraft Protection

Overdraft protection is a service that automatically transfers funds from one bank account to another in order to avoid overdraft fees when insufficient funds are available. It can apply to savings accounts, checking accounts, lines of credit or credit cards. Overdraft protection carries its own fees, however. Usually, the service is automatically applied when an account is opened and the customer must opt out; other times consumers must sign up for the service.


Overlimit, or over-the-limit, means that the amount of debt that is charged to a credit card account is higher than the balance that is agreed to and allowed by the credit card lender. When a cardholder attempts to make purchases that will surpass the credit limit, the card issuer may decline the transaction or charge overlimit fees.

Payment Due Date

The payment due date is the monthly date when at least a minimum payment is due to be paid on a credit card account. It may not fall on the same date each month.

Penalty Rate

After one or two late payments (varies between credit cards), adds several percentage points to the current APR.

Periodic Rate

The interest rate described in relation to a specific amount of time, either monthly or daily.

Personal Identification Number

The personal security number required to be entered into a keypad at the point of sale to complete the transaction. The cardholder usually selects the number and can change it.


Piggybacking is the act of improving your credit score or rating by becoming an authorized user on someone else's credit card. By doing this, you receive all the benefits of having good credit without actually having built any of the credit yourself. It is most often used by parents with their children or with spouses. In recent years, the practice has become controversial because companies sprang up to act as middlemen, matching up strangers -- one with bad credit, one with good.

Platinum Card

Credit card with a higher limit and more perks than both a standard card and gold card.


The applicant has passed the first round of credit-information screening. However, this does not guarantee a credit card and the company can still turn the applicant down if the credit rating is unsatisfactory.

Prepaid Cards

A prepaid card is a form of secured card that is tied to a previously deposited cash balance. Purchases made with prepaid cards are checked for approval against existing funds. Essentially a stored-value card, they usually carry major association logos and can be spent in the same way.

Previous Balance

System used by card issuer basing finance charges on the amount owed at the end of the previous billing cycle. Does not include payments, credits and new purchases made during the current billing period.

Prime Rate

The interest rate a bank charges to its top customers. Many issuers use the prime rates established by large financial institutions such as Citibank or Chase Manhattan or the Wall Street Journal's prime rate average. Credit card rates are often the prime rate plus a certain percentage to cover its risk in lending and its profit margin.


The amount of money borrowed. The amount of money owed, excluding interest.

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. It is accepted only by the retailer who issued it. Retailers partner with a bank or a card-issuing management company to back the cards.

Qualifying Ratios

As calculated by lenders, the percentage of income that is spent on housing debt and combined household debt. The first qualifying ratio, called the front ratio, is the percentage of monthly before-tax income that goes toward a house payment. The back ratio is the sum of the house payment and all other monthly debt -- credit cards, car payments, student loans and the like -- divided by before-tax income.


Percentage a borrower pays for the use of money, usually expressed as an annual percentage.

Rebate Card

The card allows the customer to accumulate 'rewards' such as merchandise, cash or services based on card usage. Rewards are usually airline tickets, discounts on future purchases or cash refunds.

Regulation Z

A rule, enforced by the Federal Reserve Board and implementing the Truth-in-Lending Act, that requires lenders to disclose all credit-related costs including the annual percentage rate.

Remaining Balance

Unpaid principal on a loan


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 the debt.

Revolving Credit

A line of credit that does not have a specified repayment schedule but may require a minimum payment to cover interest and contribute to paying off principal. Typical of credit card loans, checking account cash reserve or overdraft accounts that have pre-approved lines of credit.

Revolving Line of Credit

An agreement to lend a specific amount to a borrower, and to allow that amount to be borrowed again once it has been repaid. Most credit cards offer revolving credit.

Reward Card

A credit card carrying an incentive or 'reward' for use, typically involving cash back, merchandise points or frequent flier points. Many different reward schemes have evolved to encourage particular uses (such as grocery or dining purchases, or travel). See Tiered reward cards.

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.

Secured Debt

A debt that is secured by a lien on debtor's property that may be taken by the creditor in case of nonpayment by the debtor. A common example is a mortgage loan.

Service Charge

Fees charged to customers for specific services or as a penalty for not meeting certain requirements such as insufficient funds in a checking account.

Simple Interest

Interest computed only on the principal balance, without compounding.

Smart Cards

A card that has a pre-determined limit of cash, which is then drawn off with every purchase. The card stores information on a microprocessor or memory chip rather than the magnetic stripe found on ATM and credit cards.

Standard Card

The basic card offered by credit card companies.

Standard Payment Calculation

A method of figuring out how much monthly payments should be, based on the beginning loan balance, the term and the interest rate.


A detailed record of transactions in a bank customer?s account(s) for a certain period, usually each month, which shows debits, credits, transfers, payroll deposits, account balance, check fees, service charges, ATM activity, etc..

Subprime Borrower

A borrower with a less-than-perfect credit report due to late payments or a default on debt payments. Lenders often grade them based on the severity of past credit problems, with categories ranging from 'A-' on down to 'D' or lower.

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.

T - Tiered

Tiered pricing is indicated by the letter 'T' after the APR. With tiered pricing different levels of outstanding balances have different periodic rates. The rate shown is for the lowest of the balance tiers. Rate is based amount of outstanding balance, cumulative charges made or cardholder's credit and risk rating.

Teaser Rate

The introductory rate. Usually a temporary lower rate to encourage customers to switch credit cards. After the teaser rate is over, the charged rate increases to the indexed rate or the interest rate


The time to the maturity of a loan or deposit, expressed in months or years.

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.

Time-Barred Debt

Time-barred debt is a type of old, unpaid debt. Every state has a statute of limitations that sets a limit on how long a creditor can get a court judgment forcing repayment of credit card debt. Typically this allotted time is three to 10 years, depending on the state. Debt that is older than this allotted time is considered “time-barred debt.” This debt does not go away. See 'Zombie Debt.'

Total Expense Ratio

The percentage of monthly debt payments compared to total before-tax income.

Transaction Date

The purchase date of goods or services or the date of the cash advance.

Transaction Fees and Other Charges

As if annual fees aren't enough, credit card companies can charge a fee if you make a late payment, exceed your credit limit, or get a cash advance. Some even charge a monthly fee whether or not you use the card.

Truth in Lending Act

Federal law that protects consumers by requiring lenders to publish specific information so borrowers can compare cost and terms of credit offered by lenders. The facts lenders must publicize are: finance charges in dollars and as an annual percentage rate (apr); the length of the grace period, if any; annual fees; minimum payment required; and the company providing the credit line and the credit limit.

Two-Cycle Balance

Uses the account's last two months of activity. There are different types of two-cycle methods. This eliminates the grace period and the finance charges are usually higher. The interest on a balance is retroactive to when the purchases were posted to the account.

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.

Usage Data

Data about where an individual goes and how much time is spent at a specific site. This is particularly useful for advertisers, whose payments are based on how many times the Web page containing their advertisement is viewed. Also, online services such as America Online must track a user's sign-on and sign-off times for billing purposes.

Usurious Rate

A rate based on unnecessarily or unlawfully high interest; act or practice of lending money at high interest; sometimes intangible property taxes are applied to income from usurious rates.


Illegal, excessive interest.

V - Variable

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


A credit score product launched in March 2006 by the three major credit bureaus (Equifax, Experian and TransUnion) as a competitor product to Fair Isaac's FICO Score. Like FICO, VantageScore is a three digit numeric value that assesses a borrower's credit risk. VantageScores range from 501 to 990, with a higher score representing a lower risk to the creditor.

Variable Interest Rate

Percentage that a borrower pays for the use of money, and which moves up or down periodically based on changes in other interest rates.

Variable Rate

Percentage a borrower pays for the use of money, usually expressed as an annual percentage, and which fluctuates in tandem with a rate index.


VISA cards, a product of VISA USA, are distributed by financial institutions around the world. A VISA card holder borrows money against a credit line and repays those funds with interest if the balance is carried over from month to month in a revolving line of credit.

Wage Garnishment

Wage garnishment is a legal means creditors use to collect the amount of money a borrower owes. This is a court-ordered technique of debt collections in which the borrower’s paycheck is deducted a set amount and paid to the creditor or a court until the debt is paid in full.


The intentional and voluntary giving up of rights or claims.

Wall Street Journal Prime Rate

The fluctuating prime rate published in the Wall Street Journal, which surveys several banks to arrive at its number.

Zero Balance

The outstanding balance has been paid and no new charges added during the billing cycle.

Zombie Debt

Zombie debt is old credit card debt that has passed the statute of limitations for creditors to use legal means to collect on a debt. However, creditors can still use collection agencies to collect on the debt. From the consumer’s perspective, debts don’t die; they just rise and live on – like a zombie.