Basic terminologies in Credit cards
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| Basic terminologies in Credit cards - Technology |
Acquiring bank: The bank or financial institution that accepts payments for the products or services on behalf of the merchant.
Additional Card: A supplementary card issued on the main account, for use by a third person apart from the primary cardholder
APR: Annual Percentage Rate. APR refers to the interest rate applicable on the credit card account, after factoring in fees and other charges(Note: APR is different from the standard interest rate)
Annual fee: Fee levied by the credit card company as a maintenance charge for usage of the account
ATM: Automated Teller Machine. A cash dispensing machine installed by a bank to faciliate cash withdrawal for customers
Balance: Balance generally refers to the outstanding balance(debt) that a customer owes towards the bank. In some cases, Balance may also refer to a Credit balance, wherein a customer may have overpaid the required outstanding balance on the account
Balance transfer: Transfer of funds from another Credit card account/store/savings bank account either through electronic means or by cheque
Base rate: The rate(s) prevailing in the country/territory's financial market based on which the interest rate(s) of a credit card is determined
Credit Card/Card (or) plastic: Credit card/Card refers to the piece of plastic which the bank issues the customer, for use towards retail purchases or cash withdrawal
Cash advance: Cash advance may be a direct cash withdrawal from an ATM or a cheque drawn upon the Credit card account to utilise the funds
Charge: Charges(fees) refer to regulatory/penal charges which the credit card issuing bank may levy the customer, towards usage of the credit card account
Cheque: A banking facility that enables a customer to draw funds from his/her credit card account to pay an external entity or deposit money in another bank account held in his/her name
Continuous authority transaction: A transaction pre-authorised by the customer towards a particular merchant, to enable the merchant to debit payments automatically from the credit card account, on a periodic basis
Credit limit: The maximum limit setup by the bank, within which the customer can avail cash or use card for purchases
Credit reference agency: Legal body which acts as database for credit card companies and manages customer information for use towards legal/marketing purposes
Debt: An outstanding balance which the customer owes towards the card issuing bank. for example, if Mr X has obtained a new credit card and used it to buy a TV set for $1000, he is now said to be owing a balance of $1000 towards the credit card company
Default charge: Charge that the bank levies on the account, whenever the customer breaches the the terms and conditions. For example, Late fees and returned payment charges are default charges
Due date: Final date before which a customer should make a minimum payment towards the balance on the account
Fraud: Person who deliberately misuses the credit card of another person, for his/her own benefit
Interest: Charge levied by the bank if customer does not settle the balance in full, for a particular month
Insurance: Credit card insurance are typically repayment insurances which pay the minimum payment on behalf of the customer, if the customer is unable to pay due to reasons such as illness, redundancy or accident
Issuing bank: An issuing bank is a bank that offers card association branded payment cards directly to customers.
Late charge: Default charge levied by bank if a customer does not not make minimum payment within the stipulated due date
Merchant: External service provider/supplier who accepts payment from credit card and sells goods/provides services to customer
Minimum payment: Mandatory minimum amount that a customer should pay each month towards his credit card balance
PIN: Personal identification number. Confidential code number provided to a customer which needs to be keyed in the merchant's terminal or ATM whenever the card is used for purchases or cash withdrawal
Primary cardholder: The main customer, in whose name the credit card account is opened
Promotional offer: Additonal benefit provided by a credit card apart from standard facilities, in order to encourage increased spending among customers. Examples of promotional offers- Special reduced interest rate on Balance transfers or cash advances. Say, a promotional interest rate of 3% per annum as opposed to a standard interest rate of 18% per annum
Retail Purchase: Normal purchases done with the credit card, except those done at ATM machines
Reward offers: Incentive schemes provided by the credit card company to encourage spending among customers. Example of Reward offers- Cash back, Fuel points etc
Standard interest rate: The fixed interest rate upon which the outstanding balance on the credit card is billed, on a monthly basis( Please see differentiation with APR)
Transaction: Any retail purchase, cash withdrawal or cheque usage done by the customer using the credit card account
Visa/Mastercard: Visa and Mastercard are Major credit card regulating authorities. All transactions need to be authorised by either Visa or Mastercard, depending upon the Credit card logo
Hope this useful to you
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