Glossary of Credit Card Terms
Below is a list of credit card and credit industry terms which can assist with reading credit card statements as well as the fine print on credit related documents.
- Debits are, in terms of consumers, a charge put onto an account. When an individual has a checking or savings account, he or she can use a debit card to take money out a particular account in the bank. They can be created by writing a check, using an ATM or purchasing something from a merchant.
- Debit Card
- A debit card is different from a credit card. A debit card is used to take money from a particular account. The money is already there whereas a credit card is used to create a loan. The credit card bill is paid at a later point. In order to use a debit card, an individual is asked to punch in a PIN or signing.
- Debt Consolidation
- Debt consolidation is a way to centralize your debt in order to lower your monthly payments and interest rate.
- Debt-to-Income Ratio
- Debt to income ratio is a personal measure of the amount of money you earn (gross income) to the percentage that is paid towards debt. This comes into play when applying for a mortgage. The higher the debt being paid off, the more likely it is for an individual to pay a higher rate for his/her mortgage.
- Debt-to-limit Ratio
- The debt-to-limit ratio is a comparison of an individual’s credit card balance and the credit limits. The lower the ratio the better, meaning that there is little debt but a good deal of credit, is helpful for a credit score.
- Default APR
- A default APR( annual percentage rate) is an interest rate that can be applied to your credit card payment if you are late making a payment. It is also called a penalty rate.
- Default Rate
- A default rate is an interest rate that is very high. It usually occurs when an individual is late making a payment or a card holder does not follow the terms and conditions on the card. It is also called a penalty rate.
- Deferred Interest
- Deferred interest is usually advertised on car commercials saying “pay no interest until…” It is a payment plan that offers to postpone interest until a certain date. Once that date hits though, the interest that has been accruing is added to the account.
- Deleveraging is an attempt to lower the financial leverage that is in place. It is done by paying off loans or debt.
- Delinquent Account
- A delinquent account is one that is past due but in the case of a credit card holder, it is usually not reported unless it is past 30 days overdue. For example, in a student account at a university, if the payment is not received by the due date it is considered a delinquent account and is subject to a monthly penalty fee.
- Discount Rate
- A discount rate is a charge, usually between 1 and 3 percent, that merchants must pay to credit card companies in order to use generally accepted credit cards.
- Dormancy fee
- This fee was imposed on credit card accounts that had not been used in a long time or were dormant. If an account was considered inactive, the card company would apply the fee to the account to boost their income. It was popular in 2009 and part of 2010, but was banned when the final rules for the law came out. It is also known as inactivity fees.
- Dormant Account
- A dormant account is one of inactivity or no use at all. In some cases, if a certain amount of time has passed of inactivity, credit card issuers will close the account. It is also known as an inactive account.
- Double-cycle billing
- Double-cycle bulling a way to calculate how much interest must be paid on balances left on credit cards from month to month. It considers the current balance on the credit card and the average daily balance from the previous billing period. It was banned by the Credit CARD Act of 2009. It is also known as two-cycle billing.
- Due Date
- A due date is when a credit card bill is required to be paid by. If the bill does not arrive, or has not been posted by the date it is due, a late fee will be imposed. Some companies allow their customers to set their own due dates so as to avoid late payments.
Trust & Security
Over 1,250,000 cardholders since 2005