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Annual Fee
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An annual (yearly) fee associated with having a credit card. This is a separate fee from interest rate on purchases.
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APR(Annual percentage rate)
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A yearly rate of interest that includes fees and costs paid to acquire the loan. Lenders are required by law to disclose the APR. The rate is calculated in a standard way, taking the average compound interest rate over the term of the loan, so borrowers can compare loans.
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ATM
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Automated Teller Machines or cash points allow you to access cash with a credit card or other card associated with your bank account. You need to enter your personal identification number (PIN) into the machine to access cash.
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Authentication
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The process of assuring that data has come from its claimed source, or a process of corroborating the claimed identity of a communicating party.
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Authorization
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Every retailer has a purchase limit above which they must seek authorization from the card issuer before they can complete the sale. Such authorization can be done by telephone or electronically at the cash till. Authorization is used to control credit card fraud. The cardholder’s available credit limit is reduced by the authorized amount.
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Average daily balance
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This is the method by which most credit cards calculate your payment due. An average daily balance is determined by adding each days balance and then dividing that total by the number of days in a billing cycle. The average daily balance is then multiplied by a cards monthly periodic rate, which is calculated by dividing the annual percentage rate by 12. A card with an annual rate of 18 percent would have a monthly periodic rate of 1.5 percent. If that card had a $500 average daily balance it would yield a monthly finance charge of $7.50.
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Bad Credit
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A term used to describe a poor credit rating. Common practices that can damage a credit rating include making late payments, skipping payments, exceeding card limits or declaring bankruptcy. “Bad Credit” can result in being denied future credit.
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Balance Transfer
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When the outstanding balance of one credit card (or several credit cards) is moved to another credit card account.
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Balance Transfer Fee
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A fee charged by a credit card company to transfer a balance from one account to another. This fee can be anywhere from 1%-5% of the balance amount. However, many credit card companies do not charge this fee. Contact the credit card issuer for their specific fees.
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Billing Cycle
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The time between billing statements, usually 28-31 days.
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Card Reader
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A device that is capable of reading the encoding on plastic cards.
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Cardholder
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An individual to whom a card is issued, or who is authorized to use an issued card.
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Cash Advance
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A cash loan from a credit card using an ATM or bank withdrawal.
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Cash Back
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Cash back returns to you a percentage of the total amount spent on your credit card over a specific period of time, usually monthly or quarterly. This feature is particularly useful if you normally pay your credit card bills in full each month, as it means you get an effective discount on the products bought with your credit card.
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Chargeback
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A transaction returned through interchange by an issuer to an acquirer. A transaction may be returned because of it was non-compliant with the association rules and regulations or because it was disputed by a cardholder.
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Chargeback Period
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The number of days from the transaction’s processing date or endorsement date, during which the issuer may initiate a chargeback.
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Credit History
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A partial profile of your financial life, given within a particular timeframe (usually measured in years). Your credit history shows the extent to which you pay your bills on time and how much you may owe particular parties. Credit card issuers use this information to decide whether to provide customers with credit cards.
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Credit Limit
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The maximum money that can be charged to a credit card account, for example $5,000. This is the maximum amount the card-holder is allowed to spend.
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Debit
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A charge to a customer’s bankcard account. A transaction, such as a check, automated teller machine (ATM) withdrawal or point-of-sale (POS) debit purchase that debits a demand deposit account.
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Expired Card
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A card on which the embossed, encoded or printed expiration date has passed.
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Finance Charge
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Fees and other costs billed to you on your statement for using the credit cards (i.e., balance transfer fees, cash advance fees, late fees, overlimit fees, etc.).
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Fixed Rate (or Fixed APR)
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An annual percentage rate that does not change throughout the year, unlike an introductory APR that changes after a specific period of time.
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Floor Limit
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An amount that Visa and MasterCard have established for single transactions at specific types of merchant outlets and branches, above which authorization is required.
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Fraudulent Transaction
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A transaction unauthorized by the cardholder of a bankcard. Such transactions are categorized as lost, stolen, not received, issued on a fraudulent application, counterfeit, fraudulent processing of transactions, account takeover or other fraudulent conditions as defined by the card company or the member company.
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Fraudulent User
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An individual who is not the cardholder or designee and who uses a card (or, in a mail/phone order or recurring transaction, an account number) to obtain goods or services without the cardholder’s consent.
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Grace Period
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A period of time during which you are allowed to pay your credit card bill without being charged a finance and/or late fee. This period is usually 10-28 days.
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Introductory Rate (or Intro APR)
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A temporary, lower annual percentage rate, after which the APR is raised.
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Issuer
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Any association member financial institution, bank, credit union or company that issues, or causes to be issued, plastic cards to cardholders.
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Magnetic Stripe
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A stripe of magnetic information that is affixed to the back of a plastic credit or debit card. This stripe contains customer and account information that is required to complete electronic financial transactions. The physical and magnetic characteristics of this stripe are specified in the International Organization for Standardization standards 7810, 7811 and 7813
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Merchant
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An entity that contracts with merchant banks or ISO’s to originate transactions.
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Merchant Agreement
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A written agreement between a merchant and a bank that contains their respective rights, duties and warranties, with respect to acceptance of the bankcard and matters related to the bankcard activity.
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Merchant Bank
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Bank that has a merchant agreement with a merchant to accept (acquire) deposits generated by bankcard transactions.
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Minimum Payment
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The lowest amount of money that you are required to pay on your credit card statement each month.
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Online Financial Transaction
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A transaction that is authorized, cleared and settled in a single online message.
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Overlimit
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This refers to a cardholder account that has surpassed its credit limit with a transaction (i.e., the cardholder’s outstanding balance is beyond his/her credit limit).
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Overlimit Fee
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A fee charged when your balance goes over your credit limit.
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Point Of Sale (POS)
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Location in a merchant establishment at which the sale is consummated by payment for goods or services received.
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Processing Date
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The date on which the transaction is processed by the acquiring bank.
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Receipt
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A hard copy document that records when a transaction took place at the point of sale. The receipt contains a description of the transaction, which usually includes the date, the merchant name/location, the primary account number, the amount and the reference number.
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Recurring Billing
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Transactions for which a cardholder grants permission to the merchant to periodically charge his account number for recurring goods or services.
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Reference Number
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Number assigned to each monetary transaction in a descriptive billing system. Each reference number is printed on the monthly statement to aid in retrieval of the document, should it be questioned by the cardholder.
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Refund
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The creation of a credit to a cardholder account, usually as a result of a product return or to correct an error.
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Sales Draft
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A paper record that evidences the purchase of goods or services by a cardholder.
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Secured card
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A credit card that a cardholder secures with a savings deposit to ensure payment of the outstanding balance if the cardholder defaults on payments. It is used by people new to credit, or people trying to rebuild their poor credit ratings.
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Service Charge
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A component of some finance charges, such as the fee for triggering an overdraft checking account into use.
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Settlement
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The reporting of settlement amounts owed by one member to another, or to a card issuing concern, as a result of clearing. Settlement is the actual buying and selling of transactions between the merchants, processors and acquirers; along with the card-issuing entities.
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Settlement Bank
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A bank, including a correspondent or intermediary bank, that is both located in the country where a member’s settlement currency is the local currency, and is authorized to execute settlement of interchange on behalf of the member or the member’s bank.
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Transaction
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(1) Any agreement between two or more parties that establishes a legal obligation. (2) The act of carrying out such an obligation. (3) All activities affecting a deposit account that are performed at the request of the account holder. (4) All events that cause some change in the assets, liabilities or net worth of a business. (5) An action between a cardholder and a merchant or a cardholder and a member that results in activity on the cardholder account.
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Transaction Identifier
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A unique 15-character value that VISA assigns to each transaction and returns to the acquirer in the authorization response. VISA uses this value to maintain an audit trail throughout the lifecycle of the transaction and all related transactions, such as reversals, adjustments, confirmations and chargebacks.
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Unsecured Credit Cards
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Credit cards that are not secured by collateral. Customers qualify for such cards based on their credit history, their financial strength and their earnings potential.
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User Authentication
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Process of validating that a user is who s/he represents her/himself to be.
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Validation Code
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A unique 4-character value that VISA includes as part of the CPS/ATM program in each authorization response. This code ensures that key authorization fields are preserved in the clearing or settlement record.
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Variable Interest Rate
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With variable-rate cards, the APR changes when interest rates or other economic indicators change. Also known as a floating rate.
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Visa
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Visa International Service Association and all of its subsidiaries and affiliates.
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Visa Card
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A card that bears the Visa symbol and which enables a Visa cardholder to obtain goods, services or cash from a Visa merchant or acquirer.
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