Credit Card Terminology Guide
If you are searching for a new credit card, you should familiarise yourself with some of the terms that credit card providers use in their promotions.
Common Terms Used By Credit Card Providers
Our credit card technology guide seeks to explain the most common terms.
This refers to the amount of money that the charges you annually to use their credit card. Most credit cards do not have an annual fee except those offering high incomes or exceptional rewards.
APR (Annual Percentage Rate)
The annual percentage rate is the rate of interest that normal use of your credit card will accrue. To compare credit cards, you should look for the lowest APR.
Balance transfer refers to the transfer of the balance of your existing credit card to a new one. You might be seeking to do this in order to secure a lower APR. If this is the case, make sure that the lower APR your new credit card is offering does not expire after a limited time period and that you will end up paying more on your credit.
Balance Transfer Credit Cards
A balance transfer credit card is one that provides an attractive APR rate to tempt you to transfer your balance to them. This normally expires after a few months, so you should make sure that the APR you refer to is not too much of the shock.
Credit card provided usually charge whenever you withdraw cash from an ATM machine using your credit card. You should only withdraw cash using this method as a last resort as it is an expensive way of getting cash because you will be charged a higher rate of interest and, occasionally, additional charges or handling fees.
Cash back Credit Card
A cash back credit card is a form of reward card that pays you back a small percentage of the value of your transactions. These types of cards are not suitable for people who tend and not to repay their form balance every month. If this is the case, you should be looking for a credit card that offers a low APR.
Your credit rating is an important factor when you apply for a new credit card. It is compiled from records stored by credit reference agencies who work on behalf of financial organisations to provide them with data about your potential credit-worthiness.
Credit Rebuild Cards
Credits rebuild cards are designed for people with bad credit ratings. Because the risk is higher than someone without a bad credit rating, the cards tend to have a high APR.
Foreign Exchange Commission
Foreign exchange commission is the commission that is added by your credit card provider whenever you make a foreign purchase that is converted to UK Sterling.
Foreign Currency Handling Charge
The foreign currency handling charge is applied by your credit card provider to each foreign currency transaction you make abroad.
Gold Or Platinum Cards
The gold or platinum credit cards are designed especially for people with a high income and often come with substantial reward benefits, fees and attentive customer service.
A handling fee is the charge made by credit card provider whenever you carry out certain transactions such as using your credit card to withdraw cash from an ATM.
Introductory Interest Rate
The introductory interest rate is something that credit card providers use to attract you to their credit cards. It is a favourable interest rate that, when compared to conventional interest rates, is much lower. After a certain time period, usually a few months, the interest rate will revert to the normal APR and so you should check that this is acceptable to you.
Low Rate Credit Cards
Loan rates credit cards offer you a low APR for all transactions that you make. The appeal of this kind of card is that you do not have to move from one credit card provider to another in order to obtain the lowest APR.
Loyalty Credit Cards
Loyalty credit cards are commonly in use with some of the large retailing organizations such as Tesco that reward you with points or other incentives whenever you use their credit card to make a transaction.
Reward Credit Cards
Reward credit cards enable you to benefit from obtaining rewards for using the credit card to make your purchases.
Typical APR Rate
The typical APR rate is commonly used by the credit card providers to standardise the rates that you are likely to pay. The definition of typical APR is the rate that at least at least two-thirds of the credit card providers’ customers will be on.
The variable rate refers to the interest rate that credit card providers charge you for using their cards. The rate of interest is variable, as opposed to fix, which means that the credit card provider is free to change the rate.
Make sure you are familiar with the terms that are used by credit card providers in order to select the best deal for you.
Prepaid Credit Cards
If you are unsure about whether or not a credit card is the right option for you, find out more about the advantages of prepaid credit cards.