Credit cards jargon buster

To understand a credit card, it's important to get to grips with the jargon. Here's a round-up of some common terms you might encounter when applying for or using a credit card.


  • Additional card: the main credit cardholder can request an extra card to share the same account and be held and used by a second person.
  • Annual fee: this is a set amount that you pay once a year for the privilege of using a credit card.
  • Annual percentage rate (APR): this is the annual rate of interest that the normal use of your card will attract. APR is the percentage of interest that will be added to the amount that you borrow over the course of a year.


  • Balance transfer: a balance transfer is when you move a balance from one card to another. One credit card pays the balance of the other one, so you owe the new card the balance instead of the old.
  • Balance transfer credit card: a card that offers an introductory rate of interest on balance transfers, normally lasting for a set length of time after the account has been opened.


  • Cash advance: when you use your credit card to withdraw cash at an ATM or bank.
  • Credit builder card: usually aimed at people with a poor or limited credit history to give them the opportunity to boost their credit rating.
  • Cashback: when your credit card company credits you an amount of money on your card, either on account opening or as a percentage of your spend.
  • Credit card charge: an additional charge that's added to certain transactions, such as cash advances or using your card abroad.
  • Credit card interest: different companies levy different rates on interest depending on the types of transaction.
  • Credit history: your credit history is a record of your credit transactions and includes information on loans, mortgages, credit cards, hire purchases, records of any missed payments, CCJs (County Court Judgements) and defaults.
  • Credit limit: your credit limit is the amount you can borrow on your credit card. It is set by your issuer, and is based on a variety of factors including your salary and credit score.
  • Contactless payment: customers can use contactless payment credit cards to pay for goods and services up to the value of £30 by simply touching the card to the reader. So there's no need to enter your PIN.
  • Credit rating: an assessment of your credit worthiness that's based on your credit history.
  • Credit reference agency: these companies assist credit card companies and lenders in assessing the risk you pose as a borrower. Their information helps lenders make a decision about lending to you and how much interest they'll charge based on your credit rating.
  • Credit report: your credit report tells lenders about your financial history, and how much of a risk you are. You can obtain a copy through a credit reference agency.


  • Due date: this is the date your credit card bill is due for payment.


  • Foreign exchange commission: this is a fee that can be charged by your credit card company for converting the cost of purchases made abroad back into sterling.
  • Foreign currency handling charge: this is a charge applied to purchases you make abroad.


  • Grace period (or interest-free days): this is the amount of time you get between spending on your card and paying your bill before you start incurring interest.


  • Handling fee: this a credit card charge that card companies add to your balance when you carry out certain transactions, such as using your card abroad, using a credit card cheque or drawing cash from your card.


  • Interest: when you're paying with a credit card, you're borrowing money from your card issuer. This means that you will be charged interest on the money you've spent – the amount will depend on your card issuer's terms and conditions.
  • Interest-free days (or grace period): the period of time after you make a new purchase on your credit card before interest is charged on your purchase.
  • Introductory interest rate: this is a special rate of interest (usually lower than market value) that's offered for a limited time, usually as an incentive to apply for the product.


  • Low rate credit cards: credit cards that offer a low APR on standard transactions.
  • Loyalty credit cards: credit cards that allow you to collect rewards as you spend. These could include air miles, cashback or points to spend in certain stores.


  • Minimum payment: this is the smallest amount of your credit card bill that you are allowed to pay back each month.


  • Notice of Variation (NOV): if your issuer makes any changes to the terms and conditions of your credit card, you will be sent a NOV. The NOV communicates those changes by showing you the amended text and a summary of what was changed.


  • Outstanding balance: this is the amount you owe on your credit card.


  • PPI: this stands for payment protection insurance – a form of cover sold to credit card users to protect them in the event they won't be able to pay their bills.


  • Transaction: any payment made (or cash withdrawn) by you or an additional cardholder using the card or card number.
  • Typical rate: the typical rate represents the APR that must be offered to the majority of people who are accepted for the credit card.


  • Variable rate: on a variable rate card, the annual percentage rate (APR) can change based on market conditions.