(Credit Card) Acceptance

Credit card acceptance is simply whether or not a merchant or online retailer will take your specific credit card as a form of payment. To know whether your credit card is accepted, look for a logo. Not every merchant displays credit card network logos, but that doesn’t necessarily mean they don’t accept cards. Just ask if you’re unsure.

Annual Fee

A credit card’s annual fee is a yearly fee paid to keep the credit card open. In most cases, the annual fee must be paid each year, regardless of whether or not you use the card. This fee is separate from your credit line.

APR (Annual Percentage Rate)

APR is the annual interest on your account if you carry a balance, expressed as a percentage.

Authorized User

An authorized user is someone added to your credit card account. This person will have a credit card in their own name, and have access to the primary cardholder’s line of credit. While an authorized user does not need a credit check, they can make purchases and build a credit history, but they are not liable for making payments.

Balance Transfer

A credit card balance transfer is when you take the balance of the amount you owe from one card and move it to another. You can save on interest payments for that balance if you transfer balances to a credit account with a lower interest rate.

Bad Credit

A term used to describe a poor credit rating. Bad credit can result in higher rates, and getting declined for credit cards, car and apartment purchases. Some common practices that may damage a credit rating include making late payments, skipping payments, exceeding credit card limits or declaring bankruptcy.

Bankruptcy

The legal process involving a person or business that cannot pay outstanding debts and may include relief from certain debts and/or the establishment or restructuring of debt repayment options.

Billing Cycle

The length of time (typically 28-32 days) between your statements.

Cardmember Agreement

A contract between you and your credit card issuer that provides the details of the relationship and obligations and rights of each of the parties.

Cash Advance

A cash advance is a feature of a credit card that allows you to borrow cash against your credit limit. In essence, it’s a short-term cash loan you can do at a bank or ATM. Typically, the card issuer charges a cash advance fee for the transaction and begins charging interest from the date you take the cash advance. The APR that applies to cash advances is also typically higher than the rates that apply to other balances.

Cash Back

Cash back is a perk that some credit card issuers offer on their cards and refers to the cardmember earning back a percentage of the money spent on that credit card.

Cash Flow

Cash flow is the amount of cash coming in and going out of your business. In a positive cash flow, more money is coming in. In a negative cash flow, more money is going out.

Chargeback

A chargeback occurs when your credit card issuer steps in between you and a merchant to return funds following a transaction dispute. 

CID (Card Identification Number)

The CID is the three-digit number at the far right on the back of your credit card and is also called a card verification (CVV) number. Merchants may ask for the CID to verify that you have the card in your possession at the time you make a transaction.

Credit Bureau

A company that collects the credit information of individuals from credit lenders and typically sells that aggregated information to credit lenders in the form of a credit report. The three major national credit bureaus are Experian, Equifax and TransUnion.

Credit History

Your credit history takes your past credit behavior, including past loans and history of paying bills on time or late, and is used as one of several tools to calculate your credit score.

Credit Limit

Also known as a credit line, a credit limit is the total amount of money that can be charged to a credit card. Carrying a balance close to your credit limit may affect your credit score, which is why it’s important to know your card limit.

Credit Score/Credit Rating

A three-digit number that is calculated by credit bureaus (or any other company) that shows your credit worthiness using a formula that is calculated by weighing various factors such as debt to income ratio, past payment behavior, types of accounts, age of accounts, and other information. Each credit bureau has different formulas.

Credit Report

A report compiled by one or more credit bureaus. A credit report details purchase history, all on-time or late payments, credit inquiries and information on any accounts ever opened with credit card companies. Your credit history shows how well you pay your bills on time and how much you may owe to other parties. Credit card issuers use this information to decide whether to provide their customers with credit cards.

Debit Card

A card issued by a bank that directly accesses available funds from a bank account, typically a checking account.

Default

When a customer doesn’t make a required payment to a credit card account by the payment due date, or otherwise violates the terms of the agreement between the credit card company and the customer.

Grace Period

The period of time during which you are allowed to pay your credit card bill without having to pay interest on certain balances.

Gift Card

Similar to a pre-paid card with pre-loaded funds but it is not linked to a specific bank account and is meant to be used only at a specific merchant.

Hard Inquiry

Occurs when you apply for a line of credit and the lender checks your credit report before making a lending decision. The lender must have a permissible purpose to access your credit report. A hard inquiry can lower your credit score and remain on your credit report for up to two years.

Interest Charges

Interest charges are the cost of borrowing money. The interest rate that creditors charge is typically expressed in terms of an Annual Percentage Rate (APR), and the interest charges are a percentage of your unpaid balance.

Introductory Rate

A lower APR offered by a credit card company to new customers for a limited period of time for purchases and/or balance transfers. Once this rate expires, your standard APR/interest rate will apply.

Late Payment Fee

A fee charged when a payment has not been received by the payment due date.

Limited Liability Company (LLC)

A Limited Liability Company (LLC) is a type of business structure that can protect your personal assets and make it easier to separate your business and personal expenses.

Minimum Payment

The smallest payment a customer can make each statement period to keep the account in good standing. If you only pay the minimum payment, you will incur interest on the unpaid balance and it will take you longer to pay off your balance.

Penalty APR

A higher APR the credit card company charges on new transactions, after the customer has made late payments, exceeded their credit line, or otherwise did not abide by the Cardmember Agreement.

PIN (Personal Identification Number)

A security code that the customer uses with debit and credit cards to authorize cash advances or other transactions.

Pre-Approved

Being pre-approved for a credit card typically means the card issuer has determined that you meet certain initial criteria that may include credit score and credit history, and it is likely that the issuer will offer you a credit card if you apply.

Pre-Screened

A potential customer who meets a credit card issuer’s credit criteria based on information obtained from a credit report. If after the customer responds to a pre-screened offer, the credit card issuer determines that the customer no longer meets the issuer’s credit criteria, credit may not be extended.

Pre-Paid Card

A card that is not linked to a specific bank account, funds are pre-loaded onto it.

Prime Rate

One type of index that determines the variable interest rate a bank will charge customers.

Rewards

Credit card rewards are bonuses that a credit card company provides its cardmembers for using its card. Popular rewards can take the form of points toward travel or shopping, or cash back incentives. Some credit cards offer you rewards in the form of rebates, cash back or reward points that can be used to purchase goods and services in exchange for using their credit card.

Secured Card

A type of credit card that requires a deposit as collateral, which affects the credit limit on the card.

Soft Inquiry

Occurs when a company or person checks your credit report, usually as part of a background check. Also, if you’ve ever received a credit card offer in the mail, the lender may have performed a soft inquiry to pre-screen your credit eligibility for the card.

Travel Rewards

Travel rewards are the points or airline miles that you can earn for using your credit card for purchases.

Zero Balance

When your billing statement shows no outstanding balance and no new charges have been incurred.

 

Originally published March 6, 2015.

Update February 17, 2020.

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