Most frequently used credit card terms.
When shopping for a credit card or reading through a card’s terms and conditions, you’ll undoubtedly stumble across terms you don’t quite understand. To help you get a handle on all these words and concepts, we put together a handy credit card glossary to quickly reference.
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An individual or a company authorized to use a credit card.
A unique number that identifies your credit card account.
Authorized user added to the account of the primary cardholder account. The additional cardholder enjoys the benefits of the credit card without the liability.
Airline credit card.
A credit card jointly issued by a financial institution and an airline company that benefits frequent flyers. Using the card, you can earn miles that can be redeemed for flights and seat upgrades. Plus, the card may come with perks such as priority boarding, free checked bags, complimentary lounge access and more.
The amount you pay every year to own the card. Some cards have no annual fee, while others can cost up to $550.
Annual percentage rate (APR) is the yearly interest you pay on your credit card for borrowing money. You can avoid paying APR if you pay your credit card balance on time.
- Variable APR. Fluctuates with the market based on the prime rate published on the Wall Street Journal.
- Fixed-rate APR. Remains the same. Despite that, a bank may decide to change it.
A request to receive a credit card. You need to be eligible and provide personal information, including your Social Security number. In most cases, this will make a hard pull on your credit.
An additional cardholder who can use a credit card but is not responsible for paying the balance. Most credit cards offer benefits to the authorized user. High-end credit cards offer travel insurance.
The amount of money you have available to spend.
An individual or company assumed to be unable to pay their balance on time. Typically, a credit score below 580 is considered bad credit.
The process of moving a balance from one credit card account to another. Typically, balance transfers come with fees of up to 5% of the amount transferred. Some credit cards offer an intro APR period on balance transfers, which is why most balance transfers are made.
Balance transfer fee.
The fee you pay to move your balance from one account to another. It’s usually 3% or 5% of the transferred balance with a minimum of $5 or $10. It’s rare to find a credit card with a $0 fee.
The time between the end of one statement date to another. It often corresponds with a monthly cycle but can vary depending on the bank.
A report issued at the end of a billing cycle that shows your transactions during the cycle, your balance and when it’s due and other information.
Business credit card.
A credit card issued to companies. Often, they are issued to small businesses.
Business credit score.
A number indicating whether the company can repay a debt on time. The business credit score can range from 0 to 100. The three major business credit score companies are Equifax, Experian and Dun and Bradstreet.
A financial institution, such as a bank or a credit union that offers payment card products to consumers.
A machine that reads the information of a credit card. It can be in the form of an automated teller machine (ATM) or a point-of-sale (POS) terminal.
Also known as a cardmember, this person is the primary owner of the credit card account with all the benefits and liability.
A short-term loan from your credit card’s line of credit. Typically, withdrawn from an ATM. It comes with a cash advance fee and cash advance APR from the moment of withdrawal.
Cash advance check.
Also known as convenience checks are drawn from your line of credit.
Cash advance fee.
The fee you pay to make a cash withdrawal from an ATM. Depending on your credit card, you can pay between 3% and 5% of the amount with a minimum of $5 or $10.
Some credit cards let you earn rewards on your purchases, which you can redeem for cash back as a statement credit. Flat cash back credit cards offer between 1% and 2% back on everything you buy, while specialized credit cards can offer up to 6% back on groceries. Sometimes, the cash back you earn can be limited.
A type of payment card that doesn’t let you carry your balance. This means you have to pay your entire balance when due.
Some credit cards have a Europay, Mastercard and Visa (EMV) microchip and every time you pay with the card you need to enter your personal identification number (PIN). This type of card is hard to counterfeit.
A credit card with a chip. This type of card often comes with a magnetic stripe, too.
The process of opening and closing credit card accounts with the goal to earn the signup bonus.
The date when your billing cycle ends.
A payment card issued jointly by a financial institution and a retailer. Cobranded cards come in the form of an airline, hotel, cruise line and retail company credit cards.
A personal assistant service that some credit cards offer. It can help you book a restaurant, find a gift, provide you with sporting event tickets and more.
Purchasing products with your payment card by tapping it near a POS terminal. The technology used with this service is radio frequency identification (RFID) technology or near-field communication (NFC).
Corporate credit card.
Credit cards designed for large corporations with a revenue of $1 million and a large number of employees. This type of card is designed to streamline the accounting process and reduce credit card misuse.
A company that collects financial data of various creditors and shares it with banks and financial institutions.
A plastic card issued by a financial institution or a company that lets you make payments on credit.
Credit card number.
A unique number embossed on the credit card. The first six digits define the issuing network (Visa, Mastercard, Discover or American Express) and the issuing bank. The remaining numbers identify your account.
When a bank searches your credit score to find out whether you can pay your balance on time.
A financial institution’s request to check your credit score. Typically this happens when you apply for a loan, and the lender will want to know whether you can pay it on time.
The maximum amount of money you can borrow with your credit card.
An estimate of an individual or a company to pay their obligations based on previous dealings.
A number that shows how likely you will be to pay your debt. Personal credit score ranges from 300 to 850. Business credit score ranges from 0 to 100.
A non-profit financial organization owned by its members. Credit unions act like banks, and they issue credit cards, home loan mortgages and more.
Credit utilization ratio.
The amount of revolving credit you are currently using divided by the total revolving credit amount that you have. A credit utilization ratio below 30% is considered good for building credit.
Currency conversion fee.
Also known as a foreign transaction fee, this is what you pay for using your card abroad. Some credit cards have no conversion fees, while others have up to 3% of the amount of each transaction you make.
A Card Verification Value (CVV) is a card security number, designed to minimize the risk of fraud. American Express cards have four-digit CVV number at the front of the card, while all other card issuers have three-digit CVV on the back of the card.
A debt refinancing option where you take one loan to pay off multiple debts.
An electronic system that stores your credit card information and it lets you make electronic transactions. You can either purchase items online or in-store using your smartphone.
Reversing a transaction when the cardholder believes that it’s not valid.
An account with no activity for a long period of time. This is also known as an inactive account.
The date by which you have to make your balance payment to avoid penalties.
Some airline and hotel reward programs offer tiered rewards based on customer’s activity. Elite status is usually hard to earn, but if you succeed you get to enjoy additional benefits at the airline or hotel.
A FICO score of more than 800 is considered excellent. This means lenders consider you a reliable debtor and you get to have the lowest interest rates and the best credit cards.
The date by which a credit card is valid. The numbers, consisting of a month and a year are embossed on your card.
A FICO score between 580 and 670 is considered a fair credit.
FICO. Fair Isaac Corporation (FICO) is a data analytics company that created the FICO score. The FICO score is used by lenders to determine a borrower’s credit risk.
The interest you pay on your debt. The interest is represented as an APR and it’s charged daily. You can avoid finance charges by paying your balance on time.
The rate at which you earn rewards on your credit card purchases. If your card offers a flat rate of 1.5% cash back, you earn 1.5% on all of your purchases.
Fleet credit card.
A payment card designed for companies to better manage their vehicle and gas expenses. These cards can be used for fuel or vehicle maintenance.
Gas credit card.
A credit card that earns rewards on gas purchases. It can be issued by a bank or a gas station.
A score between 670 and 740 is considered good credit.
The time period where you can pay your balance without incurring interest.
Requests made by lenders to check your credit rating. Lenders check when you have applied for an auto loan, mortgage or credit card. A hard inquiry, also known a hard pull, affects your credit score.
Hotel credit card.
A credit card issued jointly by a financial institution and a hotel brand where you can earn free stays on your purchases. In addition, you may get benefits such as complimentary breakfast, free WiFi and more.
A fee imposed by some banks for inactive or dormant credit card accounts.
An introductory period, typically from the moment you opened your account, where you won’t pay any interest on your balance. This can be either an intro APR period on balance transfers, on purchases or both.
Introductory period on a credit card, often from the moment you open your account, where you get benefits such as no interest or no fees on specific account activities.
The financial institution that issues payment cards.
An account held by more than one individual where both have the same benefits and liabilities.
Using one or more credit cards to obtain cash and purchasing power. This includes the use of intro APR on balance transfers, cash advances to pay existing balances or using services like PayPal.
The fee that you incur when you pay your balance after the due date.
Line of credit.
The maximum amount of money you can use for purchases.
A reward program some retailers offer that lets you earn points or miles on your purchases that you can later redeem for rewards.
The lowest amount of money you are required to pay on your credit card each month.
A penalty fee charged by your card issuer when you exceed your credit line.
Some banks can impose a penalty interest rate (APR) after you make one or more late payments. It can be up to 31% and it can last indefinitely.
A payment card that is not linked to your bank account. To use the card, you must first load it with money.
Prime rate. The interest rate used by banks at which they lend to consumers.
The interest rate incurred to purchases. This only applies to balances that haven’t been paid.
A credit card issued by a retailer that lets you earn rewards on your purchases.
A line of credit which you can use once you have paid it off.
Reward card. A credit card that lets you earn rewards on your purchases. It can be in the form of cash back or points and miles that can be redeemed for a variety of rewards.
Secured credit card.
A credit card where you have to deposit funds. Your deposit acts as your credit. This type of cards is typically used for building credit.
A device illegally attached to ATMs to copy credit card information. This information can be later used to clone your credit card and make unauthorized purchases.
A credit report check that doesn’t affect your credit score. This is also known as a soft pull.
Student credit card.
A credit card issued primarily to students.
Travel credit card.
A credit card that lets you earn rewards on your travel purchases, such as airfare or hotel stays. The rewards you earn often have a higher value when redeemed for travel purchases.
Unsecured credit card. A payment card with an unsecured line of credit.
When you have a clear understanding of these terms, you can start comparing credit cards to find one that fits your needs.