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Glossary of Credit Card Terms

Have you stumbled across a word on our website that you’re not familiar with? The financial world is full of terms that we do not use in everyday conversation, but that are essential to understand when making an informed financial decision. We’ve listed these key terms and their definitions below. If you find a credit-related term that we missed, please contact us so that we can add its definition to our glossary:

APR (Annual Percentage Rate)
The rate of interest that an issuer charges a cardholder on an outstanding balance over a calendar year.
See: Low Interest Credit Cards

Annual Fee
An amount charged to the cardholder once a year, billed to the cardholder’s monthly credit card statement.

Average Daily Balance
Method used by issuers to calculate interest charges and payment. It is calculated by adding up the card balance for each day of the payment period, then dividing the balance total by the total number of days in the billing cycle.

Bad Credit
A consumer credit score that is less than 600. The low score results from paying late on credit balances, failing to make payments, or having too much debt.
See: Credit Cards for Bad Credit

Balance
The amount of money owed on a credit card account.

Balance Transfer
Moving an existing balance owed on a credit card to a different account, typically one with a lower interest rate so as to save the cardholder money in interest payments.
See: Balance Transfer Credit Cards

Balance Transfer Fee
An amount charged to the cardholder by an issuer when a balance from another card is moved to one of its card accounts.

Bankruptcy
A legal declaration by an individual or a business that one is unable to pay payments owed to creditors.

Billing Cycle
The number of days between the cardholder’s most recent credit card bill and his or her next bill.

Cardholder Agreement 
A statement that sets the terms and conditions of a credit card account, including the card’s APR and fees. It also sets forth the cardholder’s rights in the event of a dispute. Cardholder agreements are required under regulations by the Federal Reserve.

Cash Advance
The ability of a cardholder to borrow cash against the available limit on a credit card account.

Cash Back
The portion a card issuer returns to the cardholder on the amount spent on a credit card account over a period of time, typically a set percentage of up to 5%.
See: Cash Back Credit Cards

Chargeback
A transaction that gets returned by a card issuer, either because of a dispute of the transaction by the cardholder or because it did not comply with certain interchange rules.

Credit Bureau
A company dedicated to collecting data on consumers from creditors about the consumer’s history of borrowing and paying bills.

Credit Limit
The maximum balance that a credit card account will allow the cardholder to accrue, unless interest or penalty fees exceed the balance.

Credit Report
The record of a particular consumer’s borrowing and payment histories, which is collected and aggregated by one or more credit bureaus.

Credit Score
A number calculated by a credit bureau which represents the strength of a consumer’s history of borrowing and paying bills. The higher the number, the less of a risk the consumer is consider to be by lenders and card issuers.
See: Get Your FREE Credit Score

Debit Cards
A card which can be used for purchases at stores or websites which accept credit cards, but that deducts money from the cardholder’s bank account or prepaid card account.

Default
The failure of a cardholder to pay a credit card balance.

Due Date
The specific day that a payment must be made by, or else the payment is considered late by the issuer.

Fixed APR
An interest rate on a credit card that does not change unless the cardholder fails to pay on time.  

Float
The period between when a purchase is made with a credit card and when the purchase gets posted to the card account and added to its balance.

Floor
The minimum interest rate charged on a variable APR credit card.

Grace Period
The interest-free period allowed by a card issuer between the date of a transaction and the billing date, usually a period of 21 to 30 days.

Intro APR
The interest rate charged by a card issuer during a specified period when the cardholder first receives the credit card. Intro periods typically last between 6 and 18 months and often offer a rate of 0%.
See: 0% Credit Cards

Minimum Payment
The smallest amount a cardholder can pay towards a credit card balance while keeping the account in good standing.  

No Credit History
Indicates that a particular individual has never had a credit card, loan, or other bill reported to a credit bureau.
See: Credit Cards for No Credit

Over-Limit Fee
A fee charged by a card issuer when a cardholder’s account balance exceeds the credit limit set on the account.

Prepaid Cards
A card that requires cardholders to deposit money into an account in order to make purchases with the card. The amount of each purchase is then deducted from the account balance.
See: Prepaid Credit Cards

Reports to Credit Bureaus
The payment history of a credit card account will be shared with a company that aggregates consumer payment histories and uses the information to determine each consumer’s credit score.

Secure Application
Indicates that the information collected via an online application gets encrypted when submitted by the applicant, ensuring that only the issuer is able to access it.

Secured Credit Cards
A credit card that requires the cardholder to pledge collateral (i.e. deposit a certain amount of money) in order to receive a credit line.
See: Secured Credit Cards

Universal Default
A provision which allows issuers to increase a cardholder's interest rate if the cardholder fails to make ontime payments to other creditors.

Unsecured Credit Cards
A credit card that does not require the cardholder to secure a credit line by backing it with a bank deposit.
See: Unsecured Credit Cards

Variable APR
A credit card interest rate which changes depending on whether other national rates or economic indicators change.

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