The world of credit cards is full of technical jargon. This can make choosing the right credit card much more difficult. In order to help potential credit card users look for the right credit card, Quiddi has created this glossary.
Annual percentage rate (APR): The annual rate of interest which represents the universal cost of borrowing. APR represents the percentage of interest that will be added to the amount that you borrow over one year.
Assets: The total value of the items you own, which can be used to pay off your debt.
Balance transfer: The movement of a balance from one card to another. Under a balance transfer, the new credit card pays the balance of the previous one, so the balance you owe is on the new card not the old one.
Credit builder card: A service designed for those with a poor or limited credit history. Credit builder cards can be used to improve credit scores so that the user will be able to access credit cards offering more exclusive terms in the future.
Cashback: Some credit card companies give you a bonus amount of money on your card, based on the opening of the card or as a percentage of your spending.
Credit card interest: The interest rate you owe is effectively the cost of your borrowing. Interest rates for different services, even on the same credit card may be different.
Credit history: A detailed account of all your credit transactions including information on loans, mortgages, credit cards, hire purchases, records of any missed payments and CCJs (County Court Judgements).
Credit limit: The maximum amount, set by the lender you are able to borrow on your card. Your credit card limit is decided by your income and your credit history.
Credit rating: a numerical reflection of your credit worthiness. Credit history is used to calculate credit rating scores.
Credit report: a fully detailed document with information on your credit history and how likely you are to miss debt repayments. It is possible to ask a credit reference agency for a copy of your credit report.
Debit card: A debit card allows you use money available in your current account for purchases either in store or online. You can use your debit card to withdraw cash from your current account using an ATM.
Grace period (or interest-free days): A time period where you will not incur interest for spending on your card. Whether you have a grace period and the duration of the grace period vary depending on the exact terms of your card.
Handling fee: This is the cost of a certain transaction. If you are charged a handling fee your credit card will be charged the amount on top of the cost of the purchase. People are often charged handling fees for using their card abroad, writing a credit card cheque or withdrawing cash from certain ATMs.
Interest: The interest you pay to the lender represents how much it costs you to use your credit card. You will usually be charged interest on the money you’ve spent – the amount will depend on your card issuer’s terms and conditions. Certain cards of a 0% interest introductory period where it is essentially free to borrow money on your cards
Minimum payment: The minimum amount that you must pay on your monthly credit card bill in order to avoid being charged a penalty by the credit card company.
Outstanding balance: The value of your remaining debt on your credit card.
Store cards: A type of credit card that you can use in that particular store. Various retailers have store cards.
Variable rate: The annual percentage rate (APR) can fluctuate depending on market conditions. This is because the variable rate is tied to interest rates that change as a result of changes in the economic environment.