Credit Card Glossary A-C
Some credit “terms” that might “interest” you
Add-on interest - Interest that is calculated at the beginning of a loan and added to the principal. It must all be repaid, even if you pay the loan off early.
Adjusted Balance - When credit card issuers subtract all payments made during the month, then add the finance charges.
Affinity Card - A card offered by two organizations, one a lending group, the other a non-financial group. Schools, nonprofit groups, athletes, singers and airlines are among those featured on affinity cards.
Annual Fee - A yearly charge for use of a credit card which is billed directly to the customer's monthly statement.
Annual Percentage Rate (APR) - The yearly rate of interest including fees and costs paid to acquire a loan. By law, lenders are required to disclose this information. The rate is calculated by taking the average compound interest rate over the term of the loan.
Authorized User - Any person who has your permission to use a credit card account.
Average Daily Balance - The method by which most credit card companies calculate your minimum payment due. The average daily balance is determined by adding each day's balance and dividing the total by the number of days in the billing cycle.
Balance Transfer - Moving an unpaid credit card debt from one card to another issuer’s card.
Basis Point - One one-hundredth of a percentage point. The difference between 5.09 percent and 5.08 percent is one basis point.
Billing Cycle - The number of days between the last statement date and the current statement date.
Billing Statement - Monthly bill that shows activity on an account, including balance, purchases, payments, credits and finance charges. Any changes to a credit card account are usually included with the statement.
Cancellation Clause - A provision that spells out under what conditions the parties can call off a deal.
Cardholder Agreement - Written terms and conditions of a credit card account. The agreement is required by Federal Reserve Board regulations. It must include the annual percentage rate, monthly minimum payment formula, annual fee and the cardholder's rights in billing disputes. Changes in the agreement may be made, with written advance notice, at any time by the issuer. Rules for making changes vary from state to state, but the rules that apply are those of the state of the issuing bank, not the home state of the cardholder.
Cash Advance Fee - Charge by a bank for using credit cards to obtain cash.
Charge Card - A card that requires full payment by the due date. Charge cards don’t allow carrying a balance and no interest is charged.
Co-branded Card - Type of affinity card issued through a partnership between a bank and a retail company. The card would have two brand names on it: the bank's name and the store's name.
Compounding Method - Used in bank rate tables. S-simple interest. A-compounded annually. H-compounded semi-annually. Q-compounded quarterly. M-compounded monthly. D-compounded daily.
Consumer Credit Counseling Service (CCCS) - Service that offers counseling on how to work out a budget and debt repayment plan.
Consumer Credit Protection Act (CCPA) - Passed in 1968, it lists basic consumer protections, including Truth in Lending disclosures. It requires creditors to state the cost of borrowing in understandable terms so consumers can figure out how much loans will cost.
Credit Bureau - Company that collects and sells information on people’s credit habits, such as how they make payments, how much credit they have available and whether they have applied for any loans. The three major U.S. credit bureaus are Equifax, Experian and TransUnion.
Credit Freeze - Sometimes called a security freeze as it locks your credit report and score. It blocks new lenders from accessing your credit file without your permission.
Credit Insurance - A policy which pays off a credit card debt if the holder loses their job, dies, or become disabled. It usually just covers the debt that existed at the last billing cycle.
Credit Monitoring Service - Commercial service which alerts customers to significant changes in their credit file for a fee.
Credit Rating - A judgment of a person’s ability to repay debts, based on current and projected income and their credit history. Also known as a credit score.
Credit Score - Three digit number that reflects a person’s credit history. The higher the number, the better the terms a lender will offer.
Credit Union - Nonprofit, cooperative financial institution which is owned and operated by its members.
Creditor - A person / business who is owed money.
