Annual Fee: A yearly fee charged by card issuers
to cover various administrative fees and customer services. Though
no-fee cards do exist, most cards have fees ranging from $15 to
$150. They are generally billed in one lump sum on one bill.
Annual Interest Rate: Interest per year divided
by amount borrowed, expressed as a percentage. The annual interest
rate is charged on purchases that don't benefit from the interest-free
period, which includes cash advances or balance transfers (in these
cases, interest is charged from the day funds are withdrawn.) Credit
card users should note that when they make a “partial payment,”
towards their bill, their following month's statement will include
interest charges on the entire amount of their previous balance.
APR (Annual Percentage Rate): A periodic percentage
rate that determines the finance charges you pay on your account.
Balance Transfer: Moving an unpaid balance from
one open credit account to another. You will save money if you transfer
balances to a credit account with a lower interest rate.
Billing Cycle: The length of time between your
statements. Discover Card billing cycles are approximately one month
Cardmember Agreement: A written document that
provides details of your agreement with the credit card issuer.
Cash Advance: Using your credit card to get cash
from a bank, ATM, or by writing a convenience check. Typically,
the card issuer charges a cash advance fee for the transaction and
begins charging interest immediately.
Charge Card: A specific kind of card that requires
full payment of your balance with each billing cycle. Typically
charge cards do not charge interest, but late fees can apply if
full payment is not received by the due date.
Credit Limit: The maximum amount that you can
charge on your credit card.
Credit Report: A report about your credit history
that lenders (credit card companies, mortgage companies, loan agents,
etc.) consult to determine if and how much money they should lend
to you. Your history for making timely payments, any outstanding
debt and open lines of credit are all shown on your credit report.
Your credit report is available from credit bureaus such as Equifax,
Experian and TransUnion.
Deadbeat: Banking jargon for someone who usually
pays his or her balance in full every month. Surprisingly, 68 per
cent of Canadians do pay their balances in full, according to a
bankers’ poll. The rest are what the banks call “revolvers.”
They’re people who pay only part of their balance.
Debit Card: A card issued by a bank that directly
accesses available funds from a bank account, typically a savings
or checking account.
Debt Consolidation: The act of replacing (consolidating)
several loans (debts) with one.
Default: When a customer doesn’t make a
required payment to a credit card account, or otherwise violates
the terms of the agreement between the credit card company and the
Equifax: Equifax is the largest credit bureau
in Canada, with files on 20 million of us. Equifax uses the FICO
score calculation method to determine your credit score.
FICO: FICO is a proprietary mathematical calculation
developed by Fair Isaac and Company to determine your credit score.
Finance Charges: Certain charges that can be incurred
when using a credit card. Finance charges include interest costs.
Grace Period: A period of days between the transaction
date and the billing date when a transaction can be paid off without
incurring an interest charge.
Interest Rate: The rate at which a credit card
company or other lender charges a customer for "borrowing"
money. It is a percentage of the amount borrowed.
Interest-Free Period: The interest-free period
on new purchases starts on the date you make a purchase and ends
on the payment due date. Interest is only charged on purchases if
the closing balance is not paid in full by the payment due date
each month. Consumers should note that cash advances and balance
transfers do not benefit from the interest-free period.
Introductory Rate: A lower APR provided by a credit
card company for a limited period of time.
Late Payment Fee: A fee charged when a payment
has not been received by the specified due date.
Minimum Payment: The smallest payment a customer
can make each statement period to keep the account in good standing.
Penalty Rate: A higher APR the credit card company
charges after the customer has made late payments, exceeded their
credit limit, or otherwise did not abide by the Cardmember Agreement.
PIN (Personal Identification Number): A security
code that the customer uses with debit and credit cards to authorize
transactions such as cash advances. This PIN is different from the
user ID and password customers use to access account information
Pre-Approved: A potential customer who has passed
an initial credit bureau evaluation.
Prime Rate: An index rate that determines the
interest rate a bank will charge customers. It is one way that a
credit card company determines APRs.
Revolver:Banking jargon for someone who pays only
part of his or her balance every month. Those who pay their balance
in full are called “deadbeats.”
Revolving and non-revolving accounts: A revolving
account such as Visa, MasterCard, or a retail store card allows
consumers to make a minimum monthly payment and roll or "revolve"
the remainder of their balance into the next month's balance. Non-revolving
accounts, such as American Express and Diners Club, must be paid
off in full every month.
Secured Credit Cards: Credit cards that require
collateral for approval. With secured credit cards, a security deposit
is needed to secure the credit card. The amount of the security
deposit usually equals the credit limit for that particular credit
card. Generally, secured credit cards are for people with no credit
or poor credit who are trying to build or rebuild credit history.
Unsecured Credit Cards: Credit cards that are
not secured by collateral. Customers qualify based on credit history,
financial strength and earnings potential.
Variable Rate: The opposite of a fixed rate. It
is generally Prime Rate + an additional rate. For example, if the
rate of a credit card is "Prime rate + 4%," and the current
prime rate is 10%, the APR would be 14%. The prime rate varies throughout
Zero Balance: When your billing statement shows
no outstanding balance and no new charges have been incurred.