Glossary

  • Account Number – This is the specific number which applies to the credit card or bank account. For credit cards, this number is printed on the front of the credit card.
  • Additional Cardholder – When another card is added to the account for someone else to use.
  • Annual Fee – Yearly fee that is charged for owning a credit card
  • Annual Percentage Rate (APR) – Yearly percentage rate which is charged for having a balance on the credit card. This rate is charged each month there is an outstanding balance, and is a percentage of this balance.
  • Approval Response – When a transaction is approved.
  • ATM – Automated Teller Machines. Often referred to as “holes in the wall”, these are cash points which allow you to access cash from your account by using a debit or credit card.
  • Authorisation – Each retailer has a limit above which they must get authorization from the card issuer before they can proceed with the transaction. This can either be done electronically by the till or has to be done over the phone. Authorisation is used in order to help prevent credit card fraud.
  • Balance Transfer – When the balance of one credit card is transferred onto another. This may be done if the balance can only be paid off slowly, so the cardholder wants to get an APR which is as low as possible in order to avoid being charged more in interest. The APR of one card is less than the current one, thus saving the cardholder money in interest when paying off the balance.
  • Balance Transfer Fee – This is the fee charged by the credit card company to transfer the balances between cards. It can vary between 1%-5% of the total balance amount. This fee is not always charged.
  • BIN – Bank Identification Number. This is the first 6 digits of a Visa or MasterCard credit card, which is used to identify who issued the card.
  • Cash Back – When cash is given to the cardholder during a purchase, additional money being charged onto the card.
  • Chargeback – When credit is placed back onto a credit card. For example, if the purchase is returned to the shop.
  • Chip and PIN – Each credit card has a chip reader which contains all information about the card which is needed by the merchant for successful a purchase or transaction. This method has been introduced in order to cut down on fraud, replacing the traditional signature (See below for further details).
  • CPS – Custom Payment Service. This is the information which Visa requires in order to authorise each transaction. This information is necessary for the transaction to adhere to the CPS criteria, so that only the minimum fee is charged for the deal.
  • Credit History – A profile of someone’s financial life, detailing whether they pay their bills on time and how they have managed other cards. This is used by the issuer to help them decide whether a card will be issued or not, and how much credit limit will be given.
  • Finance Charge – This refers to charges or fees which are applied to your bill for using the credit card, e.g. balance transfer fees, late fees, over limit fees.
  • Floor Limit – This is the amount which Visa and MasterCard have set in order for a transaction to proceed. Anything above this limit requires authorisation.
  • Grace Period – This is the length of time during which the cardholder can pay the credit card balance without being charged for it, this is usually around 10-28 days.
  • Introductory Rate – This is the rate which is offered when the card is first used for a certain period of time. After this the rate will usually go up. For example, many cards offer an introductory rate for balance transfers for a few months. Once this period had ended, a percentage of the balance transfer will be charged.
  • Low Transfer Rate – When the balance transfer rate is low.
  • Merit – Exactly the same as CPS, but these are the terms which are set by MasterCard instead.
  • Per-transaction Fees – This is the fee which is paid for every transaction to the merchant bank or other contracted party by the merchant.
  • PIN – Personal Identification Number. This is a 4-digit number, similar to a password, which has to be used in conjunction with the card in order for it to work.
  • Posting – Updating the account balance to take into consideration merchandise sales, cash advances, any adjustments, credits or payments etc.
  • Prime Rate – This is the interest rate at which the bank lends its money.
  • Smart Card – A card which has a chip and can be used in the chip and PIN process.
  • Standard Floor Limit – This is the floor limit which varies according to the merchant type.
  • Statement – Monthly bill which outlines all activity on the account, i.e. all purchases which have been made with the card and any interest or fees which have been added.
  • Terminal ID or Number – The number which is used by the merchant to identify which terminal processed the purchase.
  • Validation code – This code is a 4-character PIN which acts as a security measure in CPS/ATM transactions in each authorisation response.
  • Variable interest rate – Rather than a static figure, the APR changes when interest rates or other economic indicators do (referred to as a floating rate).