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.
- Magnetic Stipe
- A magnetic strip connects you with the credit or debit card and your account number. The card will work when connected with a device that reads the information on the magnetic strip. It is separated into three parts: the first and second part are used to hold the information about your credit account and any other information is stored on the third part.
- The margin is the difference between the variable interest rate and the prime interest rate. When an issuer sends out a monthly statement or opens an account for someone, that information for the variable interest rate must be shown.
- Merchant Agreement
- A merchant agreement is a written contract between a bank and a merchant that details the terms and conditions related to the use of bank cards and anything related to its activity.
- Merchant Bank
- A merchant bank is a credit card processing bank that has an agreement for a particular merchant to receive credit for deposits from bank card transactions minus a processing fee.
- Minimum Finance Charge
- A minimum finance charge is the smallest amount that must be paid on the balance of a credit card bill from the previous billing cycle. The charge is usually around $0.50 which can be higher than the finance charge. A minimum finance charge is different than a minimum payment.
- Minimum Payment
- A minimum payment is the smallest amount of money that a borrower must pay on a credit card statement for the month. Each credit card company can have different amount that will be due, but the "terms and conditions" document will outline the requirements for how much must be paid. Recently, the minimum payment has been raised from around the 2% it was because borrowers were long periods of time to pay off debts.
- Money Market
- The money market rate is used as an average rate for interest on bank funds. Two of the most common referred to are U.S. Treasury notes and LIBOR (London Interbank Offered Rate).
- Monthly Periodic Rate
- A monthly periodic rate is a rate and balance calculation method used for computing an individuals credit card bill. Once this is found, it will be multiplied the balance on the credit card to figure out the interest rate on a monthly basis.
- Monthly Statement
- A monthly statement is a statement that is mailed or found online by the bank for each account that shows all credit card transactions during a particular month. It shows any activity by the consumer such as payments, purchases or any charge put on the card.
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