Row of credit cards on top of eachother

Credit card glossary

By  , last updated

A

Adverse credit:  This refers to people with a low credit score that has resulted from the previous mis-management of debt. 

Affinity/Contribution cards:  Credit cards that are produced in partnership with a particular organisation or charity such as a sports team.  A percentage of every transaction charged to the card will go to the organisation, allowing you to show your support. They may also receive a payment when you first use the card.

Annual fee: Some credit card providers charge cardholders a yearly fee in return for additional services and benefits. Premium and airline cards typically levy an annual fee which can vary from £25 to £195 a year.

APR:  Annual percentage rate (APR) is the rate of interest you’ll pay on your credit card balance if you do not clear it each month. The lower the APR, the lower your interest repayments.

ATM cash withdrawal: Using your credit card to withdraw cash from an ATM. This is expensive though – you’ll be charged a withdrawal fee. The interest rates on cash withdrawals are usually higher than those charged for purchases and balance transfers. Interest is also charged from the day the withdrawal is made.

Authorised user:  A person who is authorised to use the main cardholder’s credit card account, but isn’t responsible for repaying the balance.

Available credit: The amount of money available on your credit card minus any outstanding balance, along with authorised but unposted transactions.

B

Balance transfer: A balance transfer credit card allows you to shift the balance on an existing credit card to a new card. Balance transfer cards offer 0% or low interest rates for a stated number of months, making them a good way to tackle credit card debt.

Balance transfer fee: When you transfer existing credit card debt onto a balance transfer card, you will usually have to pay a fee to your new credit card provider. This is charged as a percentage of the amount you transfer.

C

Card issuer: The provider you get your credit card from. Cash advance: Using your credit card to withdraw cash from an ATM.

Cashback credit card: A cashback credit card gives you money back when you use your card for certain goods and services or named retail outlets. Rewards vary, with some lenders providing cashback as a percentage of the amount you have spent, while others award you cashback on a tiered basis, according to what you are spending your money on.

Chip and PIN: The four digit number you will be given to allow you to spend on your card.

Credit builder card: Credit builder credit cards are designed to help improve low credit scores. They often have high APRs and low credit limits as lenders want to see that you can manage your credit responsibly.

Credit card cheque: A cheque where the money is debited from your credit card, as opposed to your current account. This is an expensive way of paying though – you’ll be charged a fee on the credit card and a higher rate of interest than is applied to purchases and balance transfers.

CCA: Otherwise known as the Consumer Credit Act 1974. It was updated in 2006 and is legislation designed to protect consumers when they are borrowing money.

CCD: The Consumer Credit Directive was introduced in February 2011 and was designed to help people decide what credit product is best for them by making the process easier, clearer and more transparent.

Credit limit: Credit limit is the maximum amount you are allowed to spend on your credit card. If you go over your credit limit, your credit card provider will charge you a fee. Providing you manage your credit card responsibly, it’s likely that your credit limit will increase over time.

Credit rating: Your credit rating, or credit score, is an assessment made by credit reference agencies such as Experian, Equifax and Call Credit of how much of a financial risk you are to lenders. Each agency has its own scoring criteria, so your score might not be the same with each one.

Your rating will determine whether you are accepted for credit and on what terms. The higher your score, the better your chances of getting a market-leading deal.

D

Debit card: A debit card gives you access to money available in your current account. You can use it to make purchases either in store or online, as well as make withdrawals from ATMs.

Default: A credit card default is triggered if you breach the terms and conditions of your credit card. This could be anything from repeatedly missing your monthly repayments to exceeding your credit limit. Defaults leave a mark on your credit file, which could affect your chances of getting accepted for credit in the future.

Direct Debit: This is a transaction set up with your bank that allows you to make one-off or regular payments to the account of an organisation or another person. You choose a date on which you want the payment to be made, and the money will leave your account on that day.

E

Euro: The currency used by most members of the European Union.

F

Foreign purchase fee: A foreign purchase fee is a charge applied by your credit card provider to any transactions made overseas.

FSA: The Financial Services Authority, this organisation is the regulator of all UK financial services in the UK.

I

Interest: Interest is a charge applied by banks for lending you money. It is calculated as a percentage of your balance.

Interest-free: Interest-free credit cards allow you to spend money without having to pay anything additional on top of your balance for a stated number of months. You still have to pay your monthly minimum payment during any interest-free promotional periods.

Interest-free period: This is a period offered by a credit card when you are not charged any interest. It is the time between the date you buy something and the date when your monthly bill is due. Some credit cards offer extended interest-free periods for new customers.

J

Joint account holder: This gives both holders of a joint credit card account equal access, responsibility and authority.

M

Main cardholder: The responsibility for the repayment of the account balance of the credit card falls with this person.

Minimum monthly payment: Your minimum monthly payment is the amount you need to repay to your credit card provider to avoid any interest charges. It is usually based on your balance each month.

Money transfer credit card: Money transfer credit cards allow you to move money straight into your current account. There is usually a fee to pay to your lender for moving money across, calculated as a percentage of the amount transferred.

O

Outstanding balance: Money that you owe on your credit card.

P

Payment due date: Make sure that on your payment due date you pay off at least the agreed minimum amount. If you are late making a payment you will be charged a penalty and it could affect your credit score.

Payment protection insurance (PPI): Payment protection insurance (PPI) is an insurance you can opt to take out to protect you if you were unable to make your credit card repayments due to illness or redundancy.

The insurance provider will either pay a percentage or help you to meet the monthly repayments.

Promotional rate: When a lender advertises a promotional rate it means the offer will only be valid for a fixed amount of time. It is important to find out when your promotional rate finishes as your APR will increase, which means you will have to pay a higher rate on outstanding balances.

Purchase credit card: A purchase credit card allows you to pay for an expensive purchase upfront and offers a level of protection should your purchases not arrive on time or are faulty.

0% interest purchase cards can be an option if you can’t pay for an item upfront as you can pay off the balance over a longer period without paying interest.

R

Reward credit card: Reward credit cards incentivise credit cardholders with perks such as cashback, money off products and services, and reward points if they clear their balance every month or spend a certain amount monthly or annually.

S

Statement: You will receive this each month and it will help you to keep tabs on exactly what you are spending. It will show what you’ve spent and owe and the minimum you can pay for that month. It will also show the date your payment is due.

Statement date: This is the final day of your monthly statement period. Any transactions after this date will show up on your statement the following month.

Store cards: These are available from various retailers and are a type of credit card that you can use in that particular store.

T

Temporary authorisation: A temporary authorisation is a transaction that has been approved but is not yet showing on your account. The value of the transaction will have been deducted from the credit available to you.

Usually, a temporary authorisation converts into a ‘posted transaction’ after a few days. However, a temporary authorisation may expire if the merchant does not complete the transaction – for example, in a hotel if you haven’t used the mini bar or charged anything to your room.

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