Glossary

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Term Definition
Additional cardholders Families and couples may need multiple cards for a single ‘line of credit’. Most lenders are happy to accommodate this, offering multiple cards under one account. Just make sure you keep track of what everyone is spending!
American Express American Express (or AMEX) is a financial services company based in the United States that issues its  own credit cards, like VISA and MasterCard. They’re one of the more well-known providers, whose products are widely accepted in many countries.
Annual fee Each year, your lender may charge you a service charge for using their credit card. The cost of this fee varies, with high-value cards tending to sport the most expensive fees.
Application fee This is the fee charged by the bank for processing a credit card application, if it applies to your new card.
APR – Annual percentage rate The APR is the interest rate charged on the balance of a credit card. When you sign up for a credit card, it’s expressed as a per annum (p.a.) figure. It should be one of the first things you compare when shopping for a new credit card.
ATM – Automatic teller machine An ATM is the hole-in-the-wall ‘money machine’ that you use to withdraw money from your bank or lender. You can use your credit card at these machines to withdraw cash (i.e. cash advance), but you’ll begin accruing interest on this money immediately.
Available credit Your available credit is the sum of money you can spend in one billing period before your reach your credit limit.
Average daily balance On each bill, you may notice your lender details your average daily balance. This is an important figure in helping your lender determine what to charge you in interest.
Balance owing How much have you spent on your credit card so far this month? This amount is called the balance owing. At the end of your credit card billing period, the balance owing figure details this dollar spend and is instead known as the closing balance.
Balance transfer When you transfer the balance of your credit card to another card with a lower interest rate for a fixed period of time, making it easier to pay off your debt. You may incur a balance transfer fee when performing this transaction.
Billing cycle One billing cycle is the period (usually 30 days) during which you’ll be charged for the use of your credit card. Your new cycle begins the day after the previous cycle.
Cash Advance A cash advance is when you use your credit card to withdraw cash or draw up a cheque. You’ll immediately be charged interest on this cash amount, at a rate that is usually higher than your APR. Cash advances may also incur a fee, calculated as a flat fee or a percentage of the withdrawn amount. Be smart about how you access cash with your credit card.
Cashback Cashback schemes are offered by lenders as a reward for spending with a credit card. Lenders will credit your account with a certain amount of cash if you fulfil certain criteria. Think of it as a discount on your shopping, but be mindful not to spend for the sake of spending.
Cash rate The interest rate charged when you use your credit card to take cash out of an ATM.
Charge card Unlike a credit card, charge cards must be paid off in full each billing cycle. Otherwise, you won’t be able to continue using the card.
Closed account fee When you choose to close an account within a certain period of time after opening it (e.g. within the first year), you may be charged a fee for doing so.
Credit Credit acts as an ‘IOU’ to big institutions. You make purchases with their money under the condition that you must pay it back before the end of your statement period. If you fail to do so, you’ll owe the lender interest.
Credit card This is a card that allows you to borrow money from your financial institution, making repayments towards the balance at the end of each month.
Credit limit Your credit limit is the maximum amount of money you can spend within one statement period with your credit card. You may be charged a fee if you exceed this limit in a billing period.
Credit Rating Your credit rating is an indication of your ability to repay credit products, represented as a three digit score. If you have a history of diligently paying off credit cards and personal loans on time, your credit rating will be considered excellent. If you have a history of plunging your finances into debt, your rating will be poor. Lenders use this rating to figure out if they should give you a loan or credit product.
Credit Report A credit report details your history in relation to all things credit, and indicates if you’re a good customer. Each credit or loan application you’ve made, how successfully you paid those products off and any other relevant information are included. Credit bureaus are responsible for preparing these reports.
Daily percentage rate Your daily percentage rate is your APR, divided by however many days there are in your current year (e.g. 365)
Debit credit card This product acts as a credit card, except you spend your own money rather than borrowing it from your lender. It’s a great product if you’re keen to shop online or engage in a rewards program, but aren’t comfortable using credit.
Default If you cannot fulfil your payment obligations to your lenders, you’ll go into default. This activity is recorded on your credit report, which will make it harder for you to apply for credit products in the future.
Fees Cash advances, late payments, exceeding your credit limit; all these things may incur credit card fees if you aren’t careful. Fees are clearly outlined in the key fact sheet, so study them carefully before you apply.
Finance charge A finance charge is the total sum of any expenses, fees or surcharges necessary to use your credit card.
Frequent Flyer Points If your credit card is linked to a rewards scheme, you may be able to accumulate Frequent Flyer points when you make eligible transactions. These points can be used to get discounts on flights, making them an attractive feature for Australians shopping for a new credit card.
Full balance The full amount owing on your credit card at the conclusion of your statement period.
Grace period Your grace period is the time between when you receive your bill and when your balance is due to be paid. If you don’t pay before this period ends, you’ll be charged interest.
Guarantor A guarantor is responsible for paying off your debt when you cannot. This person is nominated when you apply for a credit card, but – depending on your credit score – lenders won’t always ask for one.
Interchange fee An interchange fee is what the merchant (i.e. the retailer you buy things from) pays your lender when you pay for products with their card.
Interest When you spend someone else’s money (e.g. banks), you may have to pay a little extra back as a fee. This additional amount is called interest.
Interest rate The percentage charged by your financial institution for lending you money on your credit card. It’s commonly expressed as an annual rate called the APR.
Interest-free days Interest-free days let you shop on credit without having to worry about being immediately charged interest.  At the beginning of your billing cycle, you have 55 interest-free days. This means you have 55 days to pay back the full balance of any purchases made in the next month before interest is calculated on those purchases.
Introductory periods Lenders reduce (or remove) credit card interest rates or annual fees to attract new customers. After the first year of you holding the card, they will revert to a higher rate or fee. Smart customers shop around each year to find new introductory offers.
Lender A bank, credit union, building society or any financial institution that will lend you money or issue you with a product that allows you to shop on credit.
MasterCard A card processing company whose cards are accepted in a large number of locations around the world.
Minimum age of the borrower The minimum age to apply for a credit card is 18 years old
Minimum interest charge When you owe a single cent of interest on your credit card, you owe at least the minimum interest charge on that account.
Minimum Payment Your minimum owed payment is the lowest amount of money you can pay over each statement period without incurring a significant penalty from your lender.
Overdraft When you overdraw your credit card account, the negative balance is called an overdraft. Going into overdraft is a surefire way to attract hefty fees, so be careful not to do this.
PIN Your PIN (personal identification number) is a password unique to each of your financial products (like your credit card) which prevents unauthorised usage.
Principal A principal is the amount of money in which your interest is calculated around: i.e. the money you spent during the month.
Purchase rate The interest charged on your credit card when you make purchases, either online or in store.
Rewards Programs A rewards program is a scheme that allows you to accumulate ‘points’ for eligible purchases made with your credit card. These points can be exchanged for discounts on flights, accommodation, and more. The Virgin Velocity and Qantas Frequent Flyers Programs are two of the better-known programs.
Statement period The period of time in which credit card transactions will be recorded during a billing cycle. It’s typically 30 days, but can vary depending on your lender.
Transaction Date The date you made a certain purchase. The details of this transaction should include who you purchased from, the amount of money you used, the time of day it occurred, etc.
VISA VISA is a card issuer that is well-known across the planet. Their cards are accepted in most countries.