Credit Card Glossary

A compilation of important terms

Balance Transfer - This is the process by which a balance on one credit card or loan can be moved to another credit card.

Beacon Score - The proprietary name given to the FICO score when it is purchased from Equifax, a credit reporting agency.

Billing Cycle - The date that your statement is produced every month. The payment due date is at least 22 later. This same date appears on every statement, regardless of holidays. Interest accrues at the time the statement cycles.

Cash Advance - Cash advances are actually cash loans taken from the financial institution that owns the account. A cash advance is usually performed one of three ways:

  • By using a credit card with a PIN at an ATM,

  • By going to the bank and presenting the credit card to a teller along with a second form of identification, or

  • By using a convenience check.

Convenience Checks - Convenience checks allow you to access their credit card accounts in situations where credit cards are not accepted. Convenience checks are accepted and processed like any other check, except they access the available credit on the cardholder’s credit card account. When processed, the amount of the check appears on the monthly credit card statement as a cash advance purchase.

Credit Card - Credit cards are a form of revolving loan by where the cardholder can access a line of credit to make purchases, cash advances, or balance transfers. As the outstanding balance is paid, the available credit line is restored for use again.

Credit Limit - The amount of credit made available for you to use.

Debit Card - A debit card is a combination of a credit card and an ATM card. Debit cards carry a credit card logo, such as MasterCard, allowing the card to be used anywhere a credit card can be used. The card can also be used anywhere an ATM card is accepted. Purchases made with a debit card are deducted from a checking account instead of a credit line.

Expiration Date - This indicates in which month and year the card expires. The card is valid until the last day of the month indicated, after the last day of the next month; the card cannot be used to make a purchase if the merchant attempts to obtain an authorization.

Fee - A fee is a charge to an account such as a late fee, an over-limit fee, or a statement copy fee.

FICO Score - The FICO score is a numeric weight that is used by financial institutions to predict the likelihood of a customer to pay. The FICO score is generated by information gathered on the credit bureaus, and is produced by Fair Isaac Company (FICO) and then supplied to the 3 credit bureaus (Experian, Equifax, and TransUnion). The score is used to make credit decisions such as approving or declining an application, increasing or decreasing a credit line, or setting the Annual Percentage Rate.

Finance Charge - The interest charged on a credit card account. This is the cost of the account to you. This is split into interest charge on purchases, balance transfers, and interest charged on cash advances.

Fixed Rate - An Annual Percentage Rate that does not fluctuate according to a published index but stays at the same rate until the issuer notifies the cardholder of a change in terms.

Grace Period - The time a financial institution gives the cardholder to repay their balance. The grace period is at least 22 days, which means that your Payment Due Date is at least 22 days after the Billing Cycle date.

Interest - The finance charge on an account.

Introductory Rate - A lower APR that is fixed for a certain length of time, usually 6 months, for new credit card accounts.

Late Fee - This is a charge made to a credit card account when the payment is made after the payment due date.

Minimum Finance Charge - The amount set as the minimum charged when an account revolves with a balance.

Minimum Payment - The minimum monthly payment on a credit card account. This is usually a set dollar amount or a percentage of the balance, whichever is greater.

Overlimit - An account is overlimit if the balance on the account is greater than the credit limit of the account. There is usually a fee when this occurs.

Past Due - A term used to describe an account when there is an outstanding payment due on the account which has not been made.

Penalty Pricing - Penalty pricing automatically increases the interest rate when an account becomes delinquent. The account usually remains at the increased interest rate levels for a specific time period before moving back to the standard interest rate.

Personal Identification Number (PIN) - The number used to access their account to get cash at an ATM machine or make other PIN verified transactions. A number automatically generated by the computer, then sealed and sent to the cardholder. (Ex. Gas station charges)

Phishing - A term used to describe an act of sending an email to a user pretending to be an established business to convince the user to provide personal information to be used for identity theft. The email invites the user to visit their website to update personal information, passwords, and/or credit card or bank account numbers or Social Security Numbers.

Prime Rate - Prime is the base rate on corporate loans posted by at least 75% of the nation’s 30 largest banks. The Prime Rate is set by the Federal Reserve and is used as an indicator of the current U.S. economic environment. This rate is used to determine the Annual Percentage Rate on variable accounts.

Variable Rate - An Annual Percentage Rate that goes up or down based on fluctuations in interest rates as reflected in a published index (such as the Prime Rate).