Credit Card Glossary – Dictionary Definitions of Common Industry Terms
The definitions below explain the common terms associated with credit cards.
- Additional Cardholder - another person who has a credit card linked to the primary account. This person's transactions as well as any rewards points earned appear on the same statement as the primary cardholder.
- Annual Fee - the account maintenance fee charged once a year. They range from $0 to over $700 depending on the features and benefits of the card.
- Available Credit - the total amount of unused credit available to a card holder. E.g. if your credit limit is $10,000 and your balance is $5,500, your current available credit is $4,500.
- Average Daily Balance - balance is determined by adding up all balances during the month and then dividing the total sum by the number of days in a given billing cycle.
- Balance Transfer - this is the process of moving existing credit card debt to a new card with a different issuer, usually with better terms, e.g. an introductory 0% interest rate.
- Balance Transfer Fee - a one-time fee, expressed as a percentage of the amount transferred, charged to move your credit card balance from one card to a new one.
- Billing Cycle - this refers to the number of days in your credit card billing period. Starting on the day after the previous close date through to the current closing date of the account.
- Business Day - Monday through Friday excluding Australian public holidays.
- Cash Advance - cash equivalent transactions made on a credit card, subject to the 'cash advance rate' as opposed to the 'purchase interest rate'. E.g. taking notes out of an ATM or gambling.
- Cash Advance Fee - a bank charge either expressed as flat fee or as a percentage of the transaction amount for making a cash advance. E.g. The greater of $2.50 or 3% of the transaction amount.
- Cash Advance Rate - the interest rate charged on cash advance transactions. Typically higher than the purchase interest rate and not subject to any interest free days.
- Closing Balance - the amount you owe your credit card issuer on the closing date, i.e. the amount of money you have borrowed from them on that particular date in time that you need to pay back to them.
- Credit - the money you can borrow from your card issuer on the promise that you will pay it back.
- Credit Bureau - a reporting agency that checks people's credit information and keeps files of their financial state of affairs. When a lender considers giving you credit they can access your credit report with your consent.
- Credit Limit - the maximum amount of money you can borrow and carry as a balance.
- Credit Score - also known as a credit rating. Lenders use your score to determine whether you are worthy of receiving credit and how much they can safely lend you.
- CVC (Card Verification Code) - the three or four digit number printed on the back of your card used to prove that you have the physical card when shopping online or over the phone.
- Debt - the amount of money you have borrowed and not paid back; the amount you owe.
- Direct Debit - an automatic payment you can set up for regular bills so you don't need to worry about missing payments.
- Earn Rate - on a rewards credit card, the earn rate is the number of points you earn per dollar you spend.
- Foreign Currency Conversion Fee - charged when you make a transaction that is converted by a credit card network, such as Mastercard, Visa or American Express, from Australian dollars to a foreign currency. You'll also incur a currency conversion fee if you make a purchase or obtain a cash advance in Australian dollars while overseas or shopping online with a foreign merchant or financial institution.
- Interest Free Period - the maximum number of days during which interest is not charged on new purchases. This applies when you've paid your closing balance in full by the statement due date.
- Interest Rate - the percentage amount by which your balance increases per statement period when you don't pay your balance in full.
- Minimum Credit Limit - the lowest credit limit (amount you can borrow) you can apply for.
- Minimum Repayment Amount - the amount shown on your statement that you must pay to avoid a late payment fee.
- Over Limit Fee - a penalty fee charged to you for exceeding your credit limit.
- Statement Period - the length of time that the list of transactions are reported on your credit card statement. Normally this is 30 days but it may differ depending on the credit card issuer.
- Variable Rate - an interest rate that is subject to change by the issuer, in contrast to a fixed or ongoing rate.
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