Credit Card Glossary


Annual Fees
Some card issuers may charge you a yearly fee in addition to the interest that accumulates when you make purchases, however this is now very much a thing of the past.

Annual Percentage Rate
The APR is a measurement of the cost of credit and enables people to compare the cost of credit cards from different sources. It includes interest along with other charges consumers have to pay. The APR is a measure of the cost of credit, expressed as a yearly rate. 

The annual percent rate of interest on your credit card tells you how much interest you will pay on outstanding balances on your credit card. 

The APR is a legal requirement. All credit card issuers must make it clear what the APR is on each of their cards.

Anti Fraud Guarantee
 
Many credit cards feature an Anti Fraud Guarantee of one kind or another. Basically, these guarantees mean that should someone obtain your card details and use them to fraudulently buy goods or services, you won't be liable for the costs involved.

Approval Rate
The credit card approval rate is a measure of the number of applications that are approved.

The approval rate will generally be lower for the cards offering the lowest rates of interest as the credit checks will be more stringent.

Cards with higher approval rates will tend to have higher interest rates as they cards are more sympathetic to people who have an adverse credit history.

Balance
The amount of money you owe the card issuer, and includes purchases, fees, interest and transaction charges.

Balance Transfer Rates
If you have an outstanding balance on other credit cards and you want to transfer this to your new credit card, some credit cards offer reduced rates on initial or all transfers.

Cash Advance
You can use your card at a bank or cash machine to get a cash loan. The interest rate for a cash advance is typically higher than it is for purchases, and there is usually no grace period. There can also be a handling fee for withdrawing cash in addition to the interest charges, which can raise the cost significantly.

Credit Referencing
This is a record of your credit history which is usually used to help creditors judge your credit worthiness. It shows whether you pay your bills on time, how much debt you have, etc. Your report is compiled by credit referencing agencies and is released to lenders. It is important to check your credit reports regularly to catch possible human errors and prevent credit frauds.

Credit Scoring
 A system used by lenders to calculate the statistical probability that credit they grant to you will be repaid. Different lenders have slightly different rules for assessing risk. Each lender works out the characteristics of 'good' and 'bad' customers, based on its past experience. 

Each answer you give on your application form will be given a rating. If the total 'score' is above a certain figure, your application is accepted. Because credit scoring is the key to different lenders risk management they do not easily reveal the precise details of how it works. 

Credit Limit
The maximum amount you may charge on a credit card. From time to time your card issuer may increase or decrease your credit limit.

Interest Free Period
Most credit cards offer up to eight weeks interest free credit if your balance is repaid in full by the due date.

Introductory APR
 An introductory interest rate offered by card issuers to "introduce" you to their services. It will usually expire after a certain amount of time (usually 6 months).

Minimum Payment
The minimum amount you are required to pay the credit card issuer each month.

Variable APR
The Annual Percentage Rate can fluctuate monthly and quarterly depending on an index which the credit card company is using.