Glossary Of Terms
Basis Point
One-hundredth of a percentage point (0.01%). The difference between 8.04 percent and 8.05 percent is one basis point. Some credit card issuers quote the interest rate on the credit card in terms of basis points. 100 basis points equal 1 percent.
Billing Statement
Each billing cycle (usually once per month), your card issuer will send you a statement. The statement will detail the activity on your account including purchases, balance transfers, cash advances, payments, credits and finance charges. The statement will also show applicable APRs for each transaction type. Important changes to a credit card account are often included in small-print fliers (statement inserts) that are sent with the statement.
Cardholder Agreement
The cardholder agreement describes all the terms and conditions of a credit card account. The cardholder agreement is required by Federal Reserve regulations. It must include the Annual Percentage Rate, the monthly minimum payment formula, annual fee if applicable, any other fees, and the cardholder's rights in billing disputes. Changes in the cardholder agreement may be made, with written advance notice, at any time by the issuer.
Credit Limit
Your credit limit is the maximum amount you may charge on a single credit card. The amount that stands charged at any instance, based on your transactions, is set off against the limit to determine available credit. Many banks will allow you to spend more than your credit limit, but may charge you an over the limit fee for doing so.
Credit Report
A report that contains details of your credit history plus additional facts about you, including your address, salary, employment history and other details. Lenders use it to determine whether to approve a loan and on what terms. A credit report includes a record of any card that you hold now, have held in the past, and for which you have applied.
EFT
Electronic funds transfer. The transfer of money between accounts by consumer electronic systems such as automated teller machines (ATMs) and electronic payment of bills.
Fair Credit Reporting Act
The U.S. Fair Credit Reporting Act seeks to achieve fair, timely and accurate reporting of credit information by regulating the activities of the Credit Reporting Agencies, Under the Fair Credit Reporting Act, you have the right to see the credit history maintained by the Credit Reporting Agencies..
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act restricts the practices debt collection agencies may use to try to obtain payments from debtors (including credit card debts). This federal law limits the harassment techniques (often used in the past) by such agencies.
Identity Theft
Identity theft occurs when someone appropriates your name, social security number, credit card number, or some other piece of your personal information without your knowledge to commit fraud or theft. If you realize this, you should immediately contact your card issuers, any other issuing authority as well as each of the three national Credit Reporting Agencies (Equifax, Experian, TransUnion) to place a fraud alert on your credit file
Joint Credit
Two persons can apply for a joint credit card that can be used by either. Joint credit is issued to two persons based on their combined assets, incomes and credit reports. It generally results in a higher credit limit (see Credit Limit), but holds both parties responsible for repaying debt.
Late Payment
A payment made after the statement’s due date. Your credit report may reflect late payments, and if you have made a habit of paying late, creditors may raise your APR and you may have difficulty obtaining additional credit cards or loans. Most creditors do not report late payments unless they exceed 30 days.
Line of Credit
The maximum amount of credit one can use at any time, based on income, debt and credit history. Your credit line is the cumulative credit you can borrow from all your credit cards.
Revolving Line of Credit
It is a line of credit (see Credit Line) that may be used repeatedly up to a certain limit. It is an agreement to allow a specific amount for purchases to a cardholder, and to allow that amount to be used again once it has been repaid. Most credit cards offer a revolving line of credit.
Simple Interest
Simple interest is interest paid only on the "principal" or the amount originally owed to the credit card company, and not on the interest owed on the credit card debt. For example, the simple interest due at the end of two years on a credit card debt of $100 at a 10% APR is $20 (10% of $100, or $10, for each of the two years). No interest is calculated in the second year on the $10 interest that was due after the first year.
Statement
A credit card statement is the detailed record of transactions of a credit card account for each billing cycle (see Billing Cycle), which shows purchases, transfers, account balance, fees, service charges, ATM activity, etc.