Glossary of Credit Card Terms
Definitions of common credit card terms -- without the legaleze.
Balance Transfer: The process of transferring the debt of one or more credit cards or loans to a different card.
Beacon Score: The name given to a FICO score, when used by the three credit agencies: TransUnion, Equifax, and Experian. It is a score given by using an algorithm to asses a credit rating by giving different weight to: late payments, collections, current debts, type of card, number of cards, and other considerations. Basically, it is a way the credit companies use to determine what type of risk an applicant poses.
Billing Cycle: The monthly date your billing occurs. It is the same every month, and interest begins with each new cycle.
Cash Advance: Withdrawing cash money from your credit card. Basically, it's a loan from the credit card company and will carry a higher interest rate, no grace period, and be subject to fees.
Credit Card: A plastic card which can be used in lieu of cash money to make purchases. A credit card means that the cardholder has been approved by the card company for what amounts to a loan. Credit cards have an account limit, are subject to a variety of different types of interest rates, fees, and conditions. The balance can be paid off monthly or over time, in installments. They can also be used to withdraw cash (with interest) in the form of a cash advance.
Credit Limit: The limit or ceiling available in a cardholder's account. It is determined by using the applicant, or cardholder's credit history, income, and other factors.
Debit Card: Similar in physical appearance to credit cards, debit cards are used much in the same way as credit cards, but debit cards withdraw money directly from a savings or checking account, rather than in the form of a loan, as with a credit card.
Expiration Date: A date printed on a credit or debit card, which indicates the ending period of use for a card. The date is a month and year, and the card is valid until the last day of that month.
Fee: A charge levied by a credit card company against a cardholder. Some types of fees are late fees, annual fees, over-limit fees, and others.
FICO Score: A credit score determined by the credit companies used to gauge an applicant, or cardholder's risk level. It is used to determine such things as APR (annual percentage rate), whether to approve an applicant, and credit limit. It is compiled by using past financial information by the Fair Isaac Company (FICO), which then passes the score on to Equifax, TransUnion, and Experian, the three credit bureaus.
Finance Charge: The interest and fees charged by the credit company for use of its card.
Fixed Rate: An annual interest rate that is "fixed" at one point for a certain length of time.
Grace Period: The amount of time, usually 22 days, that a cardholder has to pay the balance before incurring penalties.
Interest Rate: A percentage rate charged by a credit card company for borrowing money.
Introductory Rate: A fixed lower APR for new customers.
Late Fee: A charge levied against a cardholder, when payments are made past the due date.
Minimum Finance Charge: A minimum charge applied when a balance is carried over from one month to the next.
Minimum Payment: The minimum payment a cardholder can make per month to avoid incurring extra fees. Usually the greater amount between a fixed dollar amount or fixed percentage.
Overlimit fee: Term used to denote when an account's balance exceeds its credit limit, usually resulting in a fee.
Past Due: Term denoting outstanding payment on an account.
Penalty Pricing: A fee, or charge, made on a delinquent account by increasing the interest rate for a period of time, then returns to normal.
PIN: A private number given by a bank for security purposes when using a debit card. It is usually a four digit number, that can be entered in an ATM or other machine (grocery stores, gas stations) to receive cash, or allow the cardholder to make a purchase. Should never be given out or posted for others to see.
