Jargon Buster: Credit Cards

Affinity card

An affinity card is a credit card issued by a bank or credit card company that is co-branded with an organisation that consumers have a link to. Often this is a charity, which benefits from a small percentage of transactions as a donation each time you use the card.

Amex

This is a common name for an American Express card. American Express are known for their credit cards, many of which come with rewards and cashback. American Express issues their cards to individuals, small business and corporate consumers across the United States and around the world. Some cards are co-branded, such as those with British Airways and Vitality.

Available credit 

This figure tells you how much money is left on your credit card account that can be used for purchases and other transactions on credit.

Balance

Your credit card balance is effectively the money you owe your provider – in other words, what you have used so far of your available credit. It is sometimes referred to as your credit card debt.

Balance transfer credit card

A balance transfer is when you move an outstanding balance from another card with a different lender. You’ll often see the term used in the context of 0% balance transfer credit cards. 

Cashback credit card

A cashback credit card will essentially ‘reward’ your spending by offering money back on certain purchases. They can be a great way of saving money – but there’s a sting in the tail if you don’t pay off the purchase before interest kicks in or you’re late on the repayments, as these types of card usually come with higher interest rates.

Chargeback and disputes

Chargeback, otherwise known as a dispute, gives consumers the chance to claw back money in cases where the goods you bought do not arrive, are damaged, are different from the description, or where the merchant has stopped trading. It’s basically a transaction reversal (the card provider withdraws funds that were previously deposited into the recipient’s – usually a retailer – bank account and puts them back into your account) so you’re refunded.

Unlike Section 75 of the Consumer Credit Act, Chargeback is a voluntary scheme and doesn’t afford the same legal protection. However, it’s useful if your credit card purchase was under £100 and Section 75 doesn't apply.

There are no minimum or maximum spend limits for a Chargeback claim, but there is a time limit – you only have 120 days from when you first notice a problem.

Credit agreement

This is the legally binding agreement between the company that issues your credit card and you, as a lender. The credit agreement sets out all the conditions associated with providing the credit, including the interest to be paid.

Credit builder card

If you have a low credit score or are new to borrowing, a credit builder card (also known as a bad credit credit card) might be one of the only credit card options available to you. Typically they have lower credit limits and higher interest rates, but on the flip side they offer a great way to improve your credit rating by proving you can borrow responsibly. The key is to only spend a portion of the credit available to you each month, and then pay off the balance in full before the interest charges kick in.

Credit card cheques 

You can use these cheques to pay bills or transfer money into your bank account. You are normally charged a one-off fee for each cheque used.

Credit card issuer

The company that provides your credit card.

Credit card number

The 16 digit number across the front of your credit card (American Express cards only have 15 digits).

Credit limit

This is the maximum amount your card provider will let you borrow. Going over it carries the risk of your card being refused.

CVV or CVC

CVV stands for card verification value. CVC stands for card verification code. They’re both pretty much the same, in that it’s the three- or four-digit number on your card that acts as a security feature when you buy stuff online or over the phone. It helps prove you have a physical copy of the card in your hand.

Different issuers have slightly different names and locations for them. The CVV for Visa and Mastercard credit cards (three digits) is on the back, to the right of the signature box. American Express, meanwhile, uses a four-digit code, called the card identification number (CID). This can be found on the front of the card above the card number.

Debit card payment

This describes a payment made to your credit card with your debit card.

Default notice

If you receive one of these it means you’ve breached your credit agreement, usually because of overdue payments on outstanding debt. The document explains what the breach is, what must be done or paid to correct it, the date by which this must be done, and the consequences if you don’t.

Eligibility check

You’ll often see this term when applying for a credit card. It’s the check carried out by a lender to judge whether or not you meets the eligibility criteria for its card – for example, that you’re over 18 years of age and live in the UK. Note that meeting the minimum eligibility criteria is not a guarantee of approval.

Handling fee 

This basically covers any charge the card provider adds to your account for balance or money transfers, and cash or cheque transactions.

Hard credit check

If you complete and submit a full credit card application, the provider will perform what’s known as a hard credit check. It means your credit file will be inspected and a full credit search registered on your credit history.

Individual voluntary arrangements

Usually shortened to IVAs, these are formal debt repayment plans. If you’re in financial difficulties and struggling to pay off a credit card debt, this proposal could set out how to tackle it based on what you can afford outside of reasonable living costs. IVAs have to be set up by a licensed insolvency practitioner.

Interest free credit card

An interest free credit card for purchases won't charge any interest on what you buy for an initial promotional period. This usually varies between three and 28 months. These cards are handy if you can’t cover the cost of an expensive purchase upfront, as there’s no immediate rush to pay it off. If you don’t steadily repay the debt before this period ends, however, you’ll be hit with interest charges on the remaining balance.

Interest-free period

This covers the time between you buying something on your credit card and the date interest begins to accrue from that purchase. Some credit cards offer 0% interest for longer periods. These are referred to as a 0% purchases credit card and will allow you to make purchases with zero interest for limited amount of time (usually between three and 28 months). After that time, you start accruing interest on the existing debt and all future purchases.

Introductory rate

If you’re a new credit card customer, your provider may offer a special introductory rate – for example 0% on balance transfers. Note, however, that this only lasts a certain time, after which it goes to a higher standard interest rate.

Last payment date

The date the last payment was received on your credit card account.

Mastercard

Mastercard is one of the largest payment processing networks in the world. It does not issue cards directly to the public, as American Express does, but rather through member financial institutions.

Minimum payment

This is the very lowest amount you’re allowed to pay off on your credit card each month – usually a percentage of the credit card balance. Be warned that paying no more than the minimum payment will lengthen the time it takes to pay off your balance. Unless you are in an interest-free period, you will be charged interest on this outstanding balance.

Money transfer

This is when you send money from your credit card to your current account. It usually incurs a charge so you’ll need look at the terms and conditions of your credit card first. Getting a 0% money transfer card could allow you to do this more cheaply. These cards usually come with a one-off fee and it is advisable to ask the lender to transfer the credit amount into your bank when you apply, rather than withdrawing it as cash.

Notice of sum in arrears

A credit card customer will receive this if they’ve failed to make two consecutive minimum payments.

Outstanding balance

This is the total amount you owe on your card.

Overdue amount

The total amount of scheduled monthly payments not received by the required due dates, as set out in your credit card agreement.

Overlimit fee 

The charge for going over your credit limit. It’s a bit like incurring charges for going into the overdraft in your bank account.

Overseas spending / travel credit card

If you’re a frequent traveller, an overseas spending card, or travel credit card, could be a smart option for use abroad. They usually charge no or low fees for use overseas – unlike standard credit cards, that can come with high interest rates and extra fees when used out of the country it was issued in. Don’t confuse travel credit cards with currency cards, which are a type of prepaid card.

Payment due date

This is the date on which your next payment is expected. At the very least, you’ll have to make the minimum payment before this date to keep within your credit card agreement. If you’re any later you could be hit with late charges.

PIN

As with debit cards and other bank cards, credit cards have a Personal Identification Number (PIN), which you’ll need to tap in for retail transactions (except contactless, obviously) and cash withdrawals at ATMs

Promotional rate

Like an introductory rate for new customers, existing credit card holders can also benefit from good deals like 0% on card purchases for a prolonged period. These are called promotional rates and only last for a limited time.

Purchase card

A 0% purchase credit card means you won’t pay any interest on goods for a set period. Put simply, you can buy an item now and pay later (as long as it’s within the 0% period) – or spread the cost over time. It’s useful for more expensive purchases or if you buy items online regularly. Many purchase cards also offer introductory offers on balance transfers.

Reduced payment programme

A credit card provider may offer a reduced payment programme when a customer has financial difficulties (this can be proved through an income and expenditure form). The payment agreed will be less than the minimum payments due on the account.

Retail transaction

This describes a credit card payment for goods in a high street shop or online. It is also known as a card purchase.

Rewards credit card

Like a cashback credit card, a rewards credit card gives you something back on your spending. This can come in various forms, from cashback on purchases, to store credit to air miles. They can be a great way of saving money as long as you make repayments punctually – these types of card usually come with higher interest rates.

Section 75 of the Consumer Credit Act

This handy legislation offers a financial safety net if the goods you buy with your credit card are faulty or the company you bought the item from goes bust. Providing your purchase was between £100 and £30,000, you can claim the money back from your card issuer. That’s because the act says lenders are responsible for the credit agreements between traders and individuals.

It’s useful to know that under Section 75 you don't have to have paid the full amount on your credit card. The card company is liable even if you made only part of the payment – a deposit, for example – on your card.

Soft search

Unlike a hard credit check, a soft search (also called a ‘quotation search’) doesn’t register on your credit file. It can be used to see how likely you are to have your credit card application accepted without performing a formal or hard credit search.

Statement

This monthly document sets out what you've spent, what you owe, the minimum you have to pay, and the latest date you can can do this. Statements only show transactions made up until the date it was printed.

Store card

A credit card issued by a particular shop or retail chain. It can usually only be used to make purchases at those stores.

Temporary authorisation

This is a transaction that’s been approved but hasn’t yet been officially posted to your credit card account. The money will be set aside (and therefore taken off your available credit limit), but the authorisation might expire if the merchant doesn’t complete the transaction.

Total minimum payment due

This is not only the minimum amount due for that month, but also includes any minimum amounts overdue from previous months.

Zero balance transfer card

Also known as a 0% balance transfer card, this credit card allows you to transfer debt from an existing card or loan with a high rate of interest onto another without having to pay any interest on the debt for an agreed period. Although there is usually a fee to do this, it should be less than the interest you’re paying on your existing loan. Be warned, however, that unless you pay off the debt before the 0% period runs out, you could end up paying more in interest.