Credit Card Jargon Buster

If you take a look at the marketing material sent out by the different credit card providers, you’d be forgiven for thinking you were the only one who didn’t understand the jargon used. But the fact is that many people don’t fully understand some of the terms the card companies use.

It’s incredibly important that you understand the jargon before signing up to a credit card. That’s why we’ve put together a list of the key terms repeatedly used, with an explanation of what they mean.

If you’ve got any more suggestions for the jargon buster, please let us know.

APR

The APR, or Annual Percentage Rate, is the overall cost of borrowing if you owe money on your credit card.

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Card Issuer

Your card issuer is the bank, building society or store whose name is on your card (not to be confused with the card type).

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Chip and PIN

A recent introduction to the credit card market to help improve security. This is a four-digit number unique to your card that you must use when you spend with it.

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Credit Limit

The maximum amount you may owe by spending on your credit card. If you try to go over this limit, your card may be refused. If you manage to go over this limit, you may also have to pay your card issuer extra charges.

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Credit Scoring

The credit scoring system awards points to the information you provide on your application form, plus the information recorded on your credit report (which is held by a credit reference agency). It is this system that your card issuer uses to decide whether to provide you with a card or not, and if so what to set your credit limit to.

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Interest

This is the amount you’ll pay on any money you still owe after the interest-free period on your card each month.

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Interest-free Period

This is the time between when you buy something using your card, and the date that you need to pay your monthly credit card bill. This period can be 50 days or more, and is interest-free if you settle your bill in full every month.

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Minimum Payment

This is the minimum amount you must pay from your bill each month to keep your account in order.

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Outstanding Balance

After making a payment from your monthly bill, this is any money you still owe on your card

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Payment Protection Insurance (PPI)

An extra fee that you can pay each month which acts as an insurance policy. If you’re unable to pay your card due to illness or redundancy, this insurance can pay an agreed amount, and therefore help you keep up your payments to the card.

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Statement

This is your monthly credit card bill, and shows what you’ve spent in the period, what you owe, the minimum amount you must pat, and the latest date you can pay it.

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