Credit Card Glossary – Dictionary Definitions of Common Industry Terms

Information verified correct on October 22nd, 2016

If you are in search of credit card definitions, then look no further as these terms below explain all the credit card glossary commonly used by consumers.

  • Additional cardholder - means a person who you issue another credit card which is linked to the same account. i.e. If that additional person makes a transaction on their credit card it will appear on the same statement.
  • Available Credit – refers to the total amount of unused credit available to a card holder. The sum is reached by subtracting the outstanding balance from the total credit line.
  • Annual Fee – an account maintenance fee charged once a year. They range from $25 to $50, sometimes over $100 for “gold” or “platinum” cards. Also includes special services.
  • Average Daily Balance – balance is determined by adding up all balances during the month and then dividing the total sum by the number of days in a given billing cycle. Most credit card issuers calculate the daily balance based on the annual rate. If the annual rate is 12 per cent, the monthly periodic rate would be 1 per cent. If the average daily balance on the card is $300, then it would yield a monthly charge of $3.00
  • Annual Percentage Rate – a yearly interest fee inclusive of costs and fees to acquire a credit card. Interest rate is calculated based on the average compound rate.
    There are two basic types of APR plans – variable and fixed rate plans.
  1. A “Variable APR” allows the credit card issuer to change your APR when interest rates or other economic indicators; called indexes, change. These days, most credit card offers include variable rates. If you’re considering a variable rate card, the issuer must also provide information that discloses to you: how the rate is determined, which index is used, and what additional amount (“margin”) is added to determine your new rate. You will also receive information about how much, and how often your rate may change.
  2. “Fixed Rate” plans are not subject to adjustment like variable rates. They remain at the disclosed level indicated upon opening the account. But be aware: credit card companies often include disclosures which allow them to change this rate at any time. But they must provide a written notice at least 15 days prior to the change.
  • Balance Transfer – this is the process of moving a credit card debt to a different issuer, ideally with better terms, e.g. lower interest rates.
  • Billing Cycle – this refers to the number of days in your credit card billing period. Starting on the day after the previous close date through to the current closing date of the account.
  • Business day means a day other than a Saturday or Sunday or a day gazetted as a public holiday throughout Australia.
  • Cash Advance – a cash advance is cash withdrawn from the available credit of your card account. Interest will be charged daily and there is no grace period. The APR of the interest is also higher until the card balance is paid off in full.
  • Cash Advance Cheque – works like a personal cheque but the money you advance is charged to your credit card account instead. You can write a check up to your available credit limit and issue it to anybody you like. Just like cash advances these cheques will incur a transaction finance charge.
  • Cash Advance Transaction Finance Charge – a bank charge either made in a flat fee or as a percentage of the cash advance made.
  • Closing balance means is usually displayed on your monthly statement of your account. It is the amount you owe your credit card issuer on the closing date, i.e. it is the amount of money you have borrowed from them on that particular date in time that you need to pay back to them.
  • Closing date - means the date that this statement recorded its last transaction for that statement period. Usually statements are sent out each month and so they need to set a date which next months transaction will report from. The closing date is the end date of that period in time.
  • Credit – credit allows you to buy something with somebody else’s money. It is a promise made by you to repay your debt for purchases made on credit.
  • Credit card grace period – this is the period between the date of your credit card billing statement and the date payment has to be made in full before interest begins to accrue on new purchases.
  • Credit Bureau – a credit bureau is a credit reporting agency. It checks credit information of people who have obtained credit in any given way and keeps files of their financial state of affairs. When a lender considers giving you credit he can access your credit report with your consent.
  • Credit Limit – this is the maximum amount of credit you can carry as a credit card balance. Also called a line of credit. If you go over your limit, a penalty fee applies.
  • Credit Score - also known as a credit rating. Lenders use your score to determine whether you are worthy of receiving their credit and how much they can safely lend you.
  • Daily percentage rate means the rate determined by dividing your annual percentage rate by 365.
  • Finance Charge – the cost of using your credit card. It comprises of fees and other charges.
  • Grace Period: Also called a “free period,” a grace period lets you avoid finance charges by paying your balance in full before the due date. Knowing whether a card gives you a grace period is especially important if you plan to pay your account in full each month. Without a grace period, the card issuer may impose a finance charge from the date you use your card or from the date each transaction is posted to your account.
  • Over-the-Credit-Limit Fee – a penalty fee charged to you for exceeding your credit limit.
  • Secured Credit Card- this type of credit card is secured by the cardholder with a savings deposit. This ensures that  payment is made regardless if the cardholder defaults on payments. Usually this type of credit is used by people who have trouble dealing with credit cards or are new to the whole system.
  • Statement period means the length of time that the list of transactions are reported on your credit card statement, i.e. normally this is 30 days but it may differ depending on which credit card issuer you are with.
  • Transaction Fees and Other Charges: A card may include other costs. Some issuers charge a fee if you use the card to get a cash advance, make a late payment, or exceed your credit limit. Some charge a monthly fee whether or not you use the card.
  • Unsecured Credit Card – this type of credit card is not secured with collateral. If you have a good credit history and strong finances you might be able to qualify for one of these unsecured credit cards.
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2 Responses to Credit Card Glossary – Dictionary Definitions of Common Industry Terms

  1. Default Gravatar
    chad | April 19, 2013

    What is a balance transfer fee?

    • Staff
      Jacob | April 19, 2013

      Hi Chad. Thanks for your question. A balance transfer fee is a charge for processing a balance transfer, usually a percentage of the total amount you wish to transfer. Currently, no issuers charge this fee. Let us know if you would like more information. Jacob.

Credit Cards Comparison

Rates last updated October 22nd, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
20.74% p.a. 0% p.a. for 18 months $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
ME Bank frank Credit Card
Enjoy a low and consistent interest rate on purchases and cash advances, combined with no annual fee.
11.99% p.a. $0 p.a. Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
19.99% p.a. 0% p.a. for 15 months $149 p.a. Go to site More info
NAB Low Rate Credit Card
The NAB Low Rate Card offers 0% p.a. on purchases and balance transfers for 15 months. This card also comes with a low annual fee.
0% p.a. for 15 months (reverts to 13.99% p.a.) 0% p.a. for 15 months with a one off 3% balance transfer fee $59 p.a. Go to site More info

* The credit card offers compared on this page are chosen from a range of credit cards has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

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