Understanding the Terms of Your Credit Card

Understanding the terms and conditions of your credit card is often confusing and muddy; often with many legal terms throw into your terms and conditions. The most important step in understanding your card’s terms and conditions is reading them all the way through, even if there are some terms used within the terms and conditions that you don’t understand. Often these terms and conditions can be many pages long, but even if you skim read them it’s better than not reading them at all. There is absolutely nothing worse than missing something in the fine print accidentally.

Anything you don’t understand, you’re well within your right to ask your financial institution for clarification. Also, to help you understand some of the basics, here is an explanation of some of the terms. Some common terms used in the terms and conditions of your credit card are “we, us, the bank, the financial institution, etc.” All of these refer to the organization/company who is issuing you the credit card. A Credit Card association is the type of credit card the institution is issuing, such as Visa, Master Card, Diners, and American Express. An Acquiring bank is the financial institution that obtains the money from your card when you use it to pay for something. A Merchant is a business that accepts the money you pay with your credit card. “You, the user, the cardholder, yourself,” are all terms used to describe the person who uses the credit card to make purchases. This also includes additional cardholders.

Grace periods or interest-free periods are the periods of time that are usually specified in days between when you make a purchase and when interest starts to get charged for that purchase.

Interest charges refer to the interest rates, usually specified in a percentage of the amount getting charged with interest on a per year basis. So if you’re getting charged 15%, every year you’re getting charged that amount for every dollar you owe to the bank. This can add up over time, but there are ways to get around it such as paying off your purchases before your billing date.

An authorization refers to a transaction being authorized on the credit card, through some means of verification such as a pin number, signature, or security number on the back of the card.

Transaction costs refer to the cost for a transaction to be completed on the credit card. Surcharges refer to a levy placed on credit card purchases by sellers to cover the costs associated with accepting credit cards.

These are some of the basic terms that you will find in your credit card terms. As with any financial product, if you’re unsure of the terms and conditions or something else, ask the financial institution issuing the credit card for clarification. You can also seek the advice of a financial adviser if needed.

Write to Julie Williams at julie@creditdonkey.com

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