The words and terms used by financial institutions can sometimes sound like complicated jargon. We’ve put together this glossary to explain exactly what is meant by certain words and phrases to help you. Scroll through the list or click on the letters below to find what you are looking for.
Allocation of Payments
This is the order and priority given to your payments used to reduce your balance if you do not repay in full every month.
Annual Percentage Rate (APR)
The interest charged on purchases over one year. It includes the interest to be paid on the amount borrowed and other compulsory charges like annual fees. The APR does not include any avoidable charges such as over limit or late payment fees or items such as the cost of paper statements
ATM (Automated Teller Machine)
Also known as a cash machine, cash dispenser or by some as “the hole in the wall”. A machine that enables you to withdraw cash from your account and access other banking services such as checking your balance and using your Card and PIN (Personal Identification Number).
How much you have to spend at any given time. Based on your credit limit less your outstanding balance and pending transactions.
Billing Cycle or Statement Cycle
The length of time between credit card statements. Credit card billing cycles are usually around one month in length.
Term applied to a cash withdrawal you make from an ATM or a financial institution (bank or building society) displaying the Visa sign. The term can also cover gambling transactions and purchasing foreign currency or travellers cheques, arranging money orders and money transfers including those directly into your bank account.
Chip and PIN Card
A plastic payment card containing a chip that requires you to enter a 4 digit code (PIN) to verify payment in stores or at ATM cash machines.
Consumer Credit Act 1974
The legislation that regulates the consumer credit market in the UK, including credit cards.
A contractual and legally binding agreement in which you receive money and agree to repay the lender at some date in the future in accordance with agreed terms and conditions.
Credit Card Cheque
A cheque drawn against a credit card account that gives you another way of accessing funds. Interest is normally charged from the transaction date.
This is a record of how you have paid credit accounts in the past. It is used as a guide to determine whether or not you are likely to pay future accounts on time and is used by credit card issuers to decide whether to provide customers with a credit card and what credit limit to set on their account (see also Credit Record).
The maximum amount of credit issued by a lender. Under some circumstances, a credit card issuer may increase or decrease a credit limit
Credit Rating or Credit Score
A rating system used by banks, insurance companies, mortgage companies and other financial institutions which is used to judge an individual’s creditworthiness. Credit Reference Agencies provide credit data to financial institutions that use this data along with other information about a customer. This generates a points-based rating on how any particular applicant or customer compares with people who pay their bills and loans on time. The more positively a customer's behaviour compares with those people who do pay on time, the higher that customer's score and overall credit rating will be. This score is not fixed. It is possible to improve it over time by making sure you conduct any credit accounts in a timely and positive manner.
Credit Record or Report
The information held about a cardholder by a credit reference agency, concerning that cardholder's financial status (see also Credit History).
Credit Reference Agency or Credit Bureau
An organisation, licensed under the Consumer Credit Act 1974, that holds your Credit History. They gather this information from the electoral roll and other financial institutions. You have a legal right to see this information.
A measure of the likelihood of a consumer paying back an outstanding debt.
A company, organisation or an individual to whom you own money.
An aggregate measure of your past credit behaviour that allows a potential lender to decide whether or not to extend credit to you.
CSC (Card Security Code) or CVC (Card Verification Code)
The last three digits of the number printed on the reverse of the credit card, usually found on the signature strip.
An instruction to your bank authorising an institution to take regular payments from your bank account. The amount taken can vary without requiring your permission on each occasion the money is withdrawn.
This is a fee charged for late payment, over limit, tracing charges and other fees which a financial institution will charge should you breach your terms and conditions.
Fraud screening forms part of a transaction authorisation process flow and is conducted prior to authorisation to help reduce fraud.
Foreign Currency Handling Charge
If you use your card aboard you will be charged a handling fee.
Financial Services Authority, the UK financial services regulator
The period of time during which interest will not be charged on any purchases made. In the UK this is usually between 40 and 59 days. If the credit card account balance is settled in full for the total outstanding amount inside this period, no interest will be charged (see also Interest Free Period).
A fee charged for some transactions such as cash withdrawals or using your card aboard (Foreign Transaction Fee – see Foreign Currency Handling Charge)
The charge a borrower pays to borrow money. It is also the income a lender or investor will receive if they lend money or invest it in an income-producing bank account or in a security like a bond or a gilt.
Interest Free Period
The period of time a customer may be given to pay the outstanding balance in full on their latest statement before interest is charged
The percentage rate at which interest is charged on money that is borrowed or invested. It is expressed as a percentage of the amount borrowed or invested, usually over one year (see APR) but could be over one month.
Line of Credit
The total amount of credit available to a borrower. Purchases and withdrawals will not be possible beyond this limit.
Any retail outlet, place or shop where purchases are made including those made on the Internet.
The minimum amount that a cardholder must pay if there is an outstanding balance on their account to their credit card issuer each month. The amount is usually expressed as a percentage and will vary depending on the outstanding balance.
Secure internet facility for managing your account. You can view your recent transactions and statements and make payments into your account.
Payment Due Date
The date your payment must be cleared into your account (not the same as the date when you actually make payment). Some payment methods take longer to clear so you need to make sure you leave enough time for your payment to reach your account. Payments received after the due date will incur default fees.
Personal Identification Number (PIN)
A set of characters, usually a four-digit sequence, used by a cardholder to verify their identity at a point-of-sale or at a customer-activated device such as a cash machine. The number is generated by the card issuer when the card is first issued and may be changed by the cardholder to something that’s easier to remember.
Purchase Transaction or Retail Transaction
Means a transaction with a merchant displaying the Visa sign for goods and services paid for with your card.
An authority to charge a transaction to a credit or charge card at regular intervals (typically monthly) granted by the cardholder to a merchant, retailer or other service provider. An example of this is satellite TV subscription.
ROP (Repayment Option Plan)
This is service we provide as a monthly contract which may enable you to freeze your account for up to two years in the event of difficult financial circumstances. This is merely an arrangement and is NOT a regulated insurance product and will not pay off any capital or interest on your account.
A provision within the Consumer Credit Act 1974 which makes the cardholder's credit card company jointly liable with the merchant for any purchases made on a credit card. If there was a problem with a service or product provided by a merchant or if you had ordered and paid for goods from a merchant which then went bankrupt, ordinarily you would have no way to get your money back. However, if you paid for the product or service with a credit card, then the credit card company would also be responsible for putting right any losses.
A monthly record/list of your transaction including payments. It will detail the estimated interest due to be applied to your account at the next statement cycle and the minimum payment you need to make. It will not show any transactions after the statement date.
The date the statement is generated and all your transactions are totalled. You will receive your statement soon after this date.
The length of time between credit card statements. Credit card billing cycles are typically around one month in length.
An instruction to your bank authorising an institution to take payments from your bank account. Unlike a Direct Debit, this is a set amount each time and will not vary unless or until you tell your bank to change or cancel it.
A standard format for providing a brief summary of the key features of a credit card which is available on all credit card marketing materials and credit card statements. A Summary Box can be used to easily compare different products and to remind cardholders of the features of their credit cards.
Terms and Conditions
Sometimes also referred to as “T & Cs” these are the rules which you and the credit card company agree to be bound by.
Can mean any agreement between two or more parties that establishes a legal obligation and the act of carrying out such an obligation. It can also mean an action between a cardholder and a merchant or a cardholder and a credit card company that results in activity on the cardholder account.
Variable Interest Rate
An interest rate that may change from time to time. For example, a movement in the interest rate set by the Bank of England would usually have an effect on an interest rate charged by various financial institutions and lenders.
An international card scheme.