Common Credit Card Terms
If you have never had a credit card before or if you are just starting your adult financial life, you may be unaware of some common credit related terms.
This is a card issued by a financial institution that allows the cardholder to use credit to purchase goods and services up to a predetermined limit. The cardholder gets a monthly statement and then he/she has to pay back. There is an interest on the amount credited.
This is the maximum amount you can spend on the credit card. How much credit limit you get depends on your credit history.
Credit History or Credit Scoring
This is your track record of how you have paid accounts in the past. It is important from the creditor’s point of view since it determines whether you are likely to pay accounts on time in the future or not. Your score will also determine what interest rates you get and what types of cards you will qualify for.
Gold and Platinum Cards
These are credit cards available to high-end earners. These have high or no credit limit. They come bundled with a number of services and benefits not available to a standard cardholder.
Annual Percentage Rate (APR)
It is the annual rate you pay on the outstanding balance of credit as interest.
Annual fees is basically a maintenance fee that the credit card issuers charge from the cardholders annually against the costs incurred in maintaining accounts and providing services.
The credit card market is highly competitive. A number of companies offer a low, or no, rate of interest on outstanding balances for an initial period. This initial period is called introductory period, which can last for 6 to 12 months depending on the offer.
This is another term that has emerged out of the credit card market competition. Say you have an outstanding credit balance on which you are paying interest. You can apply to get another credit card that will allow you transfer that balance and get a special interest rate. This means you will be able to pay that balance off faster. Some card companies offer balance transfers as low as 0% in an introductory period.
It is a point-accumulating program based on purchases or transactions made on your card. You can redeem your reward points against cash back, discounts or free air miles, hotel stays, etc. according to the program you enroll for.
PIN (Personal Identification Number)
It is the secret code you choose for your card. You can access your money and perform banking transactions through the ATM or make purchases without signing a sales receipt at merchants that have PIN pads, using this code. Don’t share your PIN with anyone.