Glossary
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.
A
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).
Available Credit
How much you have to spend at any given time. Based on your credit limit less your
outstanding balance and pending transactions.
B
Billing Cycle or Statement Cycle
The length of time between credit card statements. Credit card billing cycles are
usually around one month in length.
C
Cash Advance
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.
Credit
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.
Credit History
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).
Credit Limit
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.
Credit Risk
A measure of the likelihood of a consumer paying back an outstanding debt.
Creditor
A company, organisation or an individual to whom you own money.
Creditworthiness
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.
D
Direct Debit
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.
Default Charges
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.
F
Fraud Screening
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.
FSA
Financial Services Authority, the UK financial services regulator
G
Grace Period
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).
H
Handling Fee
A fee charged for some transactions such as cash withdrawals or using your card
aboard (Foreign Transaction Fee – see Foreign Currency Handling Charge)
I
Interest
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
Interest Rate
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.
L
Line of Credit
The total amount of credit available to a borrower. Purchases and withdrawals will
not be possible beyond this limit.
M
Merchant
Any retail outlet, place or shop where purchases are made including those made on
the Internet.
Minimum Payment
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.
O
Online Banking
Secure internet facility for managing your account. You can view your recent transactions
and statements and make payments into your account.
P
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.
R
Recurring Transaction
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.
S
Section 75
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.
Statement
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.
Statement Date
The date the statement is generated and all your transactions are totalled. You
will receive your statement soon after this date.
Statement Cycle
The length of time between credit card statements. Credit card billing cycles are
typically around one month in length.
Standing Order
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.
Summary Box
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.
T
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.
Transaction
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.