W!se Financial Terms - Understanding Credit Cards & Consumer Protection

Cash advances

A cash advance is a service provided by many credit card issuers allowing cardholders to withdraw a certain amount of cash, either through an ATM or directly from a bank or other financial agency. Cash advances typically carry a high interest rate - even higher than credit card itself - and the interest begins to accrue immediately.

Charge cards

A card that charges no interest but requires the user to pay his/her balance in full upon receipt of the statement, usually on a monthly basis. While it is similar to a credit card, the major benefit offered by a charge card is that it has much higher, often unlimited, spending limits.

Credit card companies

Examples include: American Express, Capital One, MasterCard, Bank of America, Citi Cards, Visa

Credit cards

A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale; typically charge interest and are primarily used for short-erm financing.

Due date

Credit card bills have a due date. If your credit card payment does not arrive -- and get posted -- by the due date, you will be charged a late fee. It's important for credit cardholders to watch their payment due dates, since they sometimes change

Finance charge

A fee charged for the use of credit or the extension of existing credit; may be a flat fee or a percentage of borrowings, with percentage-based finance charges are most common. A finance charge is often an aggregated cost, including the cost of the carrying the debt itself along with any related transaction fees, account maintenance fees or late fees charged by the lender

Grace period

The grace period is the provision in most loan and insurance contracts which allows payment to be received for a certain period of time after the actual due date. During this period no late fees will be charged, and the late payment will not result in default or cancellation of the loan. A typical grace period is 15 days

Identity theft

The crime of obtaining the personal or financial information of another person for the sole purpose of assuming that person's name or identity to make transactions or purchases.

Late fee

A charge a consumer pays for making a required minimum payment on a credit card after the due date.

Credit limit

The amount of credit that a financial institution extends to a client. Also refers to the maximum amount a credit card company will allow someone to borrow on a single card; usually determined based on the person's credit rating.

Line of credit

"A line of credit (LOC) is an arrangement between a financial institution, usually a bank, and a customer that establishes a maximum loan balance that the bank will permit the borrower to maintain. The borrower can draw down on the line of credit at any time, as long as he or she does not exceed the maximum set in the agreement.
The advantage of a line of credit over a regular loan is that interest is not usually charged on the part of the line of credit that is unused, and the borrower can draw on the line of credit at any time that he or she needs to."

Minimum amount due

The smallest amount of a credit card bill that a consumer can pay, to remain in good standing with the credit card company

Minimum payment

The smallest amount of a credit card bill that a credit card holder must pay each billing cycle. The minimum payment is usually based on one of three things: a flat minimum dollar amount, a percentage of your new balance, or your interest charges and late fee plus a flat dollar amount.

Overspending

Spending more than is allowed

Penalty

Penalty rates -- often called default rates -- are exactly what the name implies. They are higher rates imposed by a credit card issuer to penalize you for paying late, exceeding your card limit or bouncing a check that you sent to make a payment.

PIN

A series of digits used to verify the identity of the holder of a card. The PIN (personal identification number) is a kind of password.

Revolving credit

A revolving credit is a line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customer's current cash flow needs

Secured Credit card

A type of credit card that is backed by a savings account used as collateral on the credit available with the card. Money is deposited and held in the account backing the card. The limit will be based on both your previous credit history and the amount deposited in the account. The limit as a percent of the deposit tends to range between 50% and 100%. Typicallyl used by people with little to no credit or past history of bad credit.