Glossary

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period, which includes cash advances or balance transfers (in these cases, interest is charged from the day funds are withdrawn.)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 in length.

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 customer.

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 online.

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 the year.

Zero Balance: When your billing statement shows no outstanding balance and no new charges have been incurred.