Credit Card

Definition

  • A plastic card with a coded magnetic stripe that holds information and security measures for a revolving line of credit. The card holder is able to use the card to make purchases by signing a credit card slip at participating retailers or companies. Credit cards have credit limits and interest rates as determined by the card issuer. The card holder's income and credit report will determine the allowable credit limit.

Notes
A payment card that gives customers access to a revolving line of credit.

Synonyms
plastic, charge card

Acronyms
CC

Alternate Spellings
American Express, Diners Club, platinum card, Sears Card, Bay Card, VISA, Mastercard

Related Terms and Acronyms

  • Acquiring Financial Institution Definition,
    • Merchants must maintain an account with an acquiring financial institution to receive credit for credit card transactions. Daily credit card totals are deposited into the merchant's account minus any fees.
  • Adjusted Balance Definition,
    • A method used by some card issuers in which they subtract all payments made during the month, then add the finance charges.
  • Affinity Card Definition,
    • A credit card (usually Visa or MasterCard) that has a promotion arrangement with an affiliated organization (often a charity or non-profit group). The logo of the group appears on the card and the group usually gets a percentage of the sales made on the card.
  • Air Miles Company,
    • One of the most popular rewards issued by airline-affiliated co-branded cards. Air miles are earned with every use of the card, and then transferred monthly to the cardholder's account with that airline.
  • American Express Company (AXP, AMEX) Company, Important,
    • A corporation known for its credit card business.
  • Annual Fee Definition,
    • A bank charge for use of a credit card levied each year, which can range from $15 to $300, billed directly to the customer's monthly statement. Many credit cards come without an annual fee.
  • Authorized User Definition,
    • Any person to whom you give permission to use a credit card account.
  • Automatic Credit Card Billing (ACCB)Acronym,
    • Automatic Credit Card Payment (ACCP)Acronym,
      • Card Holder Agreement Definition,
        • A written agreement or contract between a credit card holder and the credit issuer that details the terms and conditions of a credit card account. This agreement must include the Annual Percentage Rate, the monthly minimum payment formula, the annual fee if applicable, and the cardholder's rights in billing disputes. Changes to the agreement can be made at any time by the issuer with prior written notice.
      • Cash Advance Fee Definition,
        • A fee charged by the bank for using credit cards to withdraw money generally from an ATM or banking machine. This fee can be a flat fee per transaction or a percentage of the amount being advanced. For example, the fee may be set as: "2% / $10." This means the cash advance fee will be the greater of 2% of the cash advance amount or $10. Banks often limit the fee to a certain dollar amount.
      • Cash Cards Definition,
        • Cash cards, similar to pre-paid phone cards, contain a set amount of value, which can be read by a special cash card reader. Participating retailers will use the reader to debit the card in increments until the value is gone. The cards are like cash -- they have no built-in security, so if lost or stolen, they can be used by anyone.
      • Classic Card Definition,
        • Brand name for the standard card issued by VISA.
      • Co-branded Card Definition,
        • A type of affinity card issued through a partnership or alliance between a bank and another retail company. For instance, a large department store may co-brand a card with a bank. The card would have two brand names on it -- the bank's name and the store's name. Usually, the attraction of the card is special deals with the retail partner. Many -- particularly the ones affiliated with airlines that offer air miles -- are popular enough to command a hefty annual fee.
      • Consumer Credit Definition,
        • Loans for personal use as opposed to business or commercial lending. These loans are typically unsecured and not backed by collateral.
      • Credit Card Number (CCN)Acronym,
        • Credit Card Purchase (CCP)Acronym,
          • Credit Card Security Code (CCSC)Acronym,
            • Credit Card Verification (CCV)Acronym,
              • Credit Limit Definition,
                • The maximum amount of charges a cardholder may apply.
              • Credit Rating (CR) Acronym, Very Important,
                • A judgement of a person's ability to repay debts. The rating is often based on a person's current and projected income and past debt payment history. Also called a credit score.
                A metric to measure the credit worthiness of a debtor.
              • Credit Report (CR) Acronym, Very Important,
                • A report on a loan applicant's willingness and ability to make payments in a timely manner in the past. This report is provided to the bank by an outside agency.
                A report that outlines the credit worthiness of an individual or entity.
              • Debit Definition,
                • Another name for withdrawal of funds from your account.
              • Expensing Definition,
                • Government tax law allows individuals to expense certain business activities.
              • Foreign Currency Surcharge Definition,
                • A fee charged by a credit card company for purchases made in a foreign currency.
              • Grace Period Definition,
                • If the credit card user does not carry a balance, the grace period is the interest-free time a lender allows between the transaction date and the billing date. The standard grace period is usually between 20 and 30 days. If there is no grace period, finance charges will accrue the moment a purchase is made with the credit card. People who carry a balance on their credit cards have no grace period.
                • A window of time where a policyholder still has time to pay insurance premiums.
              • Interac Definition,
                • Canada's largest shared network of ATMs. It allows cardholders to access their accounts from any ATM on the network regardless of which financial institution owns the machine.
              • Interac Direct Payment (IDP) Acronym,
                • A method of paying for goods and services electronically with the funds taken immediately and directly from your bank account and transferred directly into the merchant's account. You use your banking card to do this.
              • Interest-Crediting Methods Definition,
                • A number of methods used to establish how interest is accrued, owed and dispersed to the parties due.
              • Letter of Credit (L/C) Acronym,
                • A letter authorizing a person or company to draw on a bank or stating that the bank will honour the credit up to the stated amount.
              • Line of Credit (LOC) Acronym,
                • A commitment by a financial institution to lend up to a specified maximum amount to a customer during a specified period of time.
              • Minimum Payment Definition,
                • The minimum amount a cardholder must pay to keep the account from defaulting. Some card issuers set high minimums if they are uncertain of the cardholder's ability to pay. Most card issuers require a minimum payment of three to five percent of the outstanding balance.
              • Monthly Periodic Rate Definition,
                • The interest rate factor used to calculate the interest charges on a monthly basis. The factor equals the yearly rate divided by 12.
              • Offline Debit Card Definition,
                • A card with traits from both ATM cards and credit cards (usually VISA or MasterCard). Banks issue this type of card either instead of or in addition to an ATM card. The card can be used anywhere the VISA or MasterCard logo is displayed, but a line of credit is not accessed -- the customer's chequing account is debited. It is "offline" because the account is not directly accessed -- there is a delay of 24 to 72 hours before the debit is made in the account. If you sign a slip of paper to complete the transaction, it is offline. In the Canada, a Personal Identification Number (PIN) may be required to use an offline debit card.
              • Penalty Rate Definition,
                • Several percentage points higher than a card's current annual percentage rate, which goes into effect after two late payments. On some cards, a single late payment triggers a penalty rate.
              • Personal Consumption Spending Definition,
                • What households collectively spend on goods and services.
              • Personal Finance Manager Definition,
                • Specialized computer programs that help customers carry out a variety of personal finance activities. These programs typically allow consumers to do much of their work off-line, then dial in to complete their bank transactions.
              • Personal Identification Number (PIN) Acronym, Important,
                • A unique, confidential number or pass code, usually consisting of four to six digits, entered by a customer when using an Automated Teller Machine (ATM) or Interac Direct Payment, that gives the customer access to his or her account.
              • Point of Sale (POS) Acronym,
                • A location where a sales transaction takes place.
                • An electronic payment system for retail goods and services, through the use of credit cards or debit cards that directly access and deduct funds from a customer's chequing account. Also known as POS.
              • Previous Balance Definition,
                • Some credit card issuers base finance charges on the amount owed by the account holder at the end of the previous billing cycle.
              • Rebate Card Definition,
                • This is a credit card that allows the customer to accumulate cash, merchandise or services based on card usage.
              • Retail Banking Definition,
                • Banking services offered to individual customers such as savings accounts, personal loans, cheque cashing, and RRSPs.
              • Revolver Definition,
                • A term credit card issuers use for card holders who roll over part of the bill to the next month, instead of paying off the balance in full each month. About seven out of 10 cardholders revolve the debt.
              • Revolving Credit Definition,
                • A line of credit that does not have a specified repayment schedule but may require a minimum payment to cover interest and contribute to paying off principal. Typical of credit card loans, chequing account cash reserve or overdraft accounts that have pre-approved lines of credit.
              • Revolving Line of Credit (RLOC) Acronym,
                • An agreement to lend a specific amount to a borrower, and to allow that amount to be borrowed again once it has been repaid. Most credit cards offer revolving credit.
              • Secured Credit Card Definition,
                • A credit card that a cardholder secures with a savings deposit to ensure payment of the outstanding balance if the cardholder defaults on payments. It is used by people new to credit, or people trying to rebuild their poor credit ratings.
              • Smart Card Definition,
                • A card with an embedded computer chip which stores more information, performs more functions and is more secure than a credit card or debit card.
              • Standard Card Definition,
                • The basic card offered by issuers. Customers with higher incomes and good credit reports can qualify for the higher-limit gold and platinum cards.
              • Teaser Rate Definition,
                • Often called the introductory rate, it is the below-market interest rate offered to entice customers to switch credit cards or lenders.
              • Unsecured Debt Definition,
                • Debt that is not guaranteed by the pledge of any collateral. Most credit cards are unsecured debt, which is a main reason why their interest rate is higher than other forms of lending, such as mortgages, which employ property as collateral.
              • X Definition,
                • A symbol used in contracts, or other legal documents, representing where a signature should appear.
              • Zero Balance Definition,
                • What shows on a credit card customer's bill when the outstanding balance has been paid and no new charges have been incurred during the billing cycle.
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