Credit Card Industry Terms

Credit Card Industry Terms

Affinity Credit Cards

An affinity card is a credit card that is branded by another organization whose logo appears on the card.

It is called an affinity card because the card issuer and some independent organization such as a hotel or airline co-market the credit card together. There are many types of organizations who wish to issue an affinity card. Charities, football teams, and large retailers share in the revenue created by its members who use the card.

Affinity credit cards are popular because everyone shares in the revenue. The credit card companies basically team up with other organizations that promote their credit cards. Visa and Mastercard benefit from additional card members, advertising exposure, etc. Special incentive rewards are often given to cardholders as well. There are over 2500 different types of affinity cards on the market today suitable to just about anyone.

Airline Miles

Airline Miles are probably the most popular type of credit card rewards club available. Each time a card member makes a purchase points are earned towards credit with the airline industry.

For years credit card companies have been teaming up with the airline industry because of the popularity of the program. With airline rewards miles, cardholders can now earn points towards the purchase of an airline ticket. The more points you earn from your credit card purchases, the more miles you will earn for your travels. You can even earn enough points to put you in a plane seat or two going to Hawaii.

When comparing airline miles rewards credit cards it is best to the different fees that are involved with being a a member of that particular rewards program. Interest rates should be duly noted as well as membership fees. Also, it is important to take note of introductory offer interest rates and balance transfer interest rates.

It is also important to take note of the rules that apply to the airlines rewards credit card before you plan a trip. Fore example, you might be subject to days that are blacked out from rewards club travelers due to very high demand. It is also customary for some rewards clubs to require members to make reservations several weeks ahead of time. Furthermore, there may be instances when the airlines require its rewards club members to use all of their miles within a certain time period or forfeit accumulated points.

Lastly, airline rewards credit cards offer people a great way to travel on a budget. The savings from having to purchase airline tickets can be used towards other trip-related expenses such as entertainment, souvenirs or even back into your pocket for another time.

Annual Fee

The annual fee that credit card companies charge is basically like a membership fee. This is simply another way for the card companies to produce additional revenue. Credit Card annual fees can vary anywhere from $25 to $150 or more. The type of credit card and the amount of benefits or prestige that it carries will often determine the annual membership fees. Institutes such as American Express started this concept with credit cards like the [American Express Gold Card} or the even more prestigious [American Express Platinum Cards]

In 1980 the United States required that credit card issuers charge an annual fee in order to keep people from credit, and thus slow inflation. In additional, the [annual fees] kept interest rates low and also gave the [credit card] issuers a safety net of income that would offset losses from bad debt, bankruptcies, theft, etc. However, in 1990 this requirement was rescinded in an effort to deregulate baking laws. Most [credit card] issuers continued to charge the annual fee, while others opted not to charge.

Today there are many [credit card] companies who do not charge an annual fee. However, there are still other institutions such as American Express that continue to charge the fee. Perhaps the economic crisis of 2008 will change how credit card companies do business, however, one this is for certain is that credit card issuers will always exist.

APR

The acronym for annual percentage rate is know as the APR. The annual percentage rate is the percentage of interest that is charged on a yearly basis. The APR for most credit card issuers varies between 3% and 21%. Furthermore, this percentage is computed on a yearly basis and thus is pro rated throughout the month. For example a loan for $1000 at 12% is calculated by adding a yearly maximum of 12% on the balance of that loan. If you were to pay off this loan in 12 months, your payments will be approximately $88 per month. At the end of the loan term you will have paid out $1056 in payments. Furthermore, while a balance on that loan remains, interest will continue to accrue and if you are not careful it is very possible to pay interest on top of interest. However, with credit cards it is more difficult to predict how much interest you are paying because your balance is constantly fluctuating downwards and then back up again. The typical formula used to calculate interest is the following: APR=(interest/12+1)^12.

The APR credit card companies charge will also vary from individual to individual. Credit history will greatly affect your APR. Those with great credit get great interest rates while those with poor credit will get higher interest rates.

Automatic Stay

When a person files for bankruptcy an [automatic stay] is put in place buy a judge as a legal instrument that restricts creditors from taking any legal actions against the debtor. This prevents another creditor from going after the debtor for money that another creditor might lay claim to as well. In a bankruptcy court assets would be split among the creditors in appropriate proportions determined by the insolvency court. Essentially, the [automatic stay] is put in measure to protect all those indebted.

Average Daily Balance

There are several ways that credit card companies calculate the amount of interest charged on your credit card balance. The most common method used the “average daily balance”. The average daily balance is calculated by averaging your monthly expenditures and then dividing by the number of days in that month. For example, if you were to charge $15 each day from January 1st through January 15th, and then on the 16th you make a $1500 purchase, your average daily balance at the end of the month (provided your last expense was on the 16th) would be $225 + $1500 which equals $1725 divided by 30 days equals $57.50. That amount is then multiplied by the interest rate which then determines how much you owe.

Balance Transfer

A balance transfer is simply what it sounds like. You use one credit card to transfer the balance from another credit card. This is usually done because you were able to secure a better rate on the balance transfer credit card. This makes sense for the new card issuer because they are already exposed to the card holders total line of credit. Therefore, if the new line credit is for $10,000, it is better for the issuing card company to transfer the balance from another credit card, in order to start charging as much interest as soon as possible.

Cardholders should also be wary of introductory offers from credit card companies. For example, in order to entice new customers, the credit card issuers offer very low rates such as 0% or 1% introductory rates. These rates usually run for a limited time such as six months. Once the introductory period has expired card issuers immediately raise interest rates, sometime even as high as 18% or more, depending on your credit score.

Cardholders should also be aware of fees that credit card companies charge to balance transfer customers. Your credit score can also determine the amount of fees that you are charged. Most credit card issuers typically charge 3% of the balance transfer or at least $5; which ever is greater.

However, despite fees, etc, balance transfer credit cards can save a consumer money. If the card holder pays off the balance transfer within the introductory period, he or she will save a substantial amount of money. This interest savings can be either be put back in your pocket or applied towards other expenses such as utilities or even entertainment.

Bank Holding Company

A Bank Holding Company is a legal corporation that is allowed to own multiple banks. Prior to 1956 banks were only allowed to operate within their own state. However, as the banking industry grew the Bank Holding Company act of 1956 was passed to allow banks to operate in other states. This allowed banks to grow and become very large like Bank of America or Wells Fargo. Bank Holding Companies are now, under deregulation laws, to compete in other financial areas such as investment banking and insurance as well. A Bank Holding Company can always be identified as their corporate name usually has the words Bankshares or Bancshare within its name. A good example is International Bancshare Corporation which is based out of Laredo, Texas and operates in other states as well.

Beacon Score

A beacon score is basically a credit rating used by lenders to indicate the creditworthiness of a particular individual This system is based on the FICO algorithm and is primarily used by Equifax, one of the three major credit scoring agencies. A BEACON is a trademarked name of the credit scoring software that is used by Equifax

Billing Statement

A billing statement is a printed summary of itemized transactions that occurred between two specific dates. The billing statement should usually show other important factors such as interest rates, current balance, minimum payment due, credit limit, payment due date as well as a listing, by date, of every transaction that was done during that billing cycle. Credit card billing cycles usually are every 30 days.

Card Holder Agreement

The card holder agreement is a legal instrument that binds the the card holder and the issuing credit card company. This bind is met under a set of terms and conditions usually predetermined by the credit card company. The card holder agreement which is required by Federal Law, must state pertinent information such as interest rate, late fees, billing cycle, dispute resolution processes, lost or stolen phone number information and even these days, the issuing card companies website.

Cash Advance

A credit card cash advance is simply a cash loan to the card holder from the credit card issuer. You can obtain your cash readily at any ATM or authorized bank. Credit Card companies typically charge a higher interest rate for these types of transactions due to the greater risk involved. Rates can run as high as 20%. In addition, card issuers typically charge a cash advance fee that may be fixed or based on a percentage between 3% and 9%. Interest will start accruing immediately. Furthermore, all payments are applied to regular purchases first and then to your cash advance.

Card Issuer

The credit card issuer is essentially the financial institution that authorizes issuing a credit card to an individual for which the bank is exposed to the liability. HSBC, Bank of American and Citigroup are good example of credit card issuers.

Cash Cards

Cash cards are the equivalent of debit cards. They are basically prepaid and your credit is limited by your available cash balance. Visa and Mastercard are heavily involved in the debit card/cash card industry. Credit card issuers make use of the liquidity that cash cards provide as well. The deposits that are held in cash card accounts are available to the issuers for immediate use as well. Furthermore, cash cards allow people who would otherwise not be able to get credit make use of a credit card. With their cash cards they can then go on line and make purchases as well make use of the system to track personal spending. Most card issuers profit by charging either up front fees or a monthly charge. Some cards are simply issued as a courtesy to account holders at many local and national banks.

Cash Back Program

A cash back program is a rewards type offering that will pay the card holder cash back for purchases made on the credit card. The concept is similar to airline rewards miles except in this case cash back is given instead of airline tickets. Some issuers will even go as far as offering you $1 back for every purchase that you make or some other incentive type program that pays you cash back for what is spent on the card.

It is also important to keep in mind that most credit card issuers will limit the amount of cash back that is given out. In addition, they also reserve the right to revoke or change the offering at anytime. Essentially, a cash back program is a good way to save money on all your credit card purchases.

Charge Card

Many people often confuse a charge card with a credit card. They are not the same thing. A credit card is essentially a revolving line of credit. The card holder is also allowed to make a minimum payment and is charged interest that is based on the individuals creditworthiness.

A charge card allows you to charge to the account, however, you must pay the balance in full at the time the bill is due. American Express is a classic example of a charge card. The card holder is not charged any interest for what he or she spends on the credit card, however, they are required to make the payment in full. If the card holder is able to demonstrate the ability to pay the account in full and on time every month, he or she is often given an unlimited line of credit.

Charge Off

A charge of is the term that is given when a debtor fails to pay a creditor for at least a term of 6 months without making any attempts to pay the debt. Once the account is classified as a charge off, it is then reported to the credit agency with that status. This does not mean that the debtor is no longer responsible for paying the debt off. More often then not, the account is turned over to a collection agency or an attorney. This will reflect negatively on the debtors credit and will result in the denial of future credit and/or increased interest rates on existing accounts.

Data Capture

This process is also known as EDC or Electronic Draft Capture. This is the process of collecting, manipulating, formatting and storing data in predetermined fields. For example, your credit card will transmit data and then the receiving computer is able to process data such as your name, billing address, expiration date, card number, dollar amount or any other type of data that the cards. This information can then be manipulated by sorting, printing, storing, etc.

Debit Card

A debit card has the look and feel of a regular credit card, however, your ability to charge on it is based on how much money is in the account linked to the card. Most banks these days give out debit cards. Furthermore, with the dawn of direct deposit, debit cards are an extremely useful way of managing money.

Debit cards are even taking over paper checks. It is much easier to swipe the card through a credit card terminal than to write out a check by hand. Furthermore, the transaction is instantaneous as opposed to a several day delay for checks to clear. This an advantage to both the vendor and the spender. Debit cards are linked to your bank account and up an to date balance is available.

Encryption

Encryption is the process of disguising and kind of message whether it be digital or not. Encryption has long been used by the military to send messages without being detected. Only those with the code are able to to decrypt the message.

Credit card issuers use encryption technology to keep your data safe while it is being transmitted from one computer to another. Online e-commerce sites such as Amazon or Best Buy use encryption technology for their online shoppers to shop their sites without fear of hackers intercepting the data. Encryption technology keeps us safe from all our enemies whether they be online trying to steel our credit card information or over seas during the middle of a crisis.

Equifax

Equifax is one of the three major independent credit reporting bureaus in the United States. They keep track of all your credit history and compile a credit report. Anyone that has ever applied for credit has more than likely gone through Equifax. Banks and other lending institutions use Equifax to determine the creditworthiness of an individual.

Equifax keeps track of your entire financial history. They know your current address as well as former addresses. They also keep track of every payment that you have made. If you make any late payments on any of your accounts, Equifax, knows about it. Equifax They know who you owe and keep track of those balances as well. They have your social security number tied to all this data about you. Equifax keeps control of all this information by referencing your social security number.

Once banks or other lenders are able to analyze your credit history, they can determine if they want to lend you money or not. If they do decide to lend you money, they will use your credit report also to determine the amount of interest you will pay. The higher your credit scores the better interest rate you will get. The lower the score, the higher the interest will be.

Fair Credit Billing Act

The Fair Credit Billing Act also known as the FCBA was established to protect consumers from unfair billing practices. Its essential purpose is to protect consumers from billing errors on open credit accounts such as credit cards or charge cards. For example, if an unauthorized third party should charge on your account, you have the right to dispute the charge and avoid charges. The FCBA will also protect you against defective goods of any kind as well as billing issues which may arise in day to day businesses transactions.

Under the FCBA act you must in writing notify the credit card companies billing inquiries department that the fraud has occurred. You then have 60 days to send your written inquiry via US Postal Service only. This dispute is the usually charged back to the vendor from where the charge came from.

The vendor then has 90 days after receiving written the notice about the charge back from the credit card company to dispute the issue. Should the vendor dispute the issue it goes into arbitration and a review board will determine who is at fault.

FDIC

The FDIC, also known as the Federal Deposit Insurance Corporation was created by the United States Government during the Great Depression to insure bank deposits up to $100,000. The failure of banks during the Great Depression caused many people to loose faith in the banking system, since so many people lost money in failed banks. The Federal Government would now insure deposits up to $100,000 , and cover the losses.

The FDIC is also managed by an appointed board of directors and senior executives. Furthermore, the chairman of the board is restricted to 5 year terms.

In 2008 another historical precedence took place when the sub-prime mortgage industry began to unravel and several major banks including Washington Mutual and Wachovia went out of businesses. The Paulson Act of 2008 raised the limits on federally insured deposits from $100,000 to $250,000. Savings accounts, checking accounts and certificates of deposit are now insured by the FDIC up to $250,000.

The FDIC does not cover losses incurred by the stock, bond, money or market funds, annuity accounts or safety deposit boxes.

The FDIC funds its program through The Bank Insurance Fund (BIF) and the Savings Association Insurance (SAIF). The BIF covers deposits made at regular banks while the SAIF will cover funds deposited at Savings and Loan Institutions.

Federal Reserve

The Federal Reserve commonly referred to a as the “Central Bank of the United States” was created in 1913. The Federal Reserve is responsible for printing money, controlling the supply of money, issuing government bonds and setting prime interest rates which affect all aspects of lending.

The Federal Reserve Board Members are appointed by the President of the United States for 14 year terms. The chairman and vice chairman of the Federal Reserve are appointed to 4 year terms. However, the President may choose to re instate the chairman for another 4 year term. Since 1913 there have been only 14 Federal Reserve chairman’s. Most recently Ben Bernanke was appointed by President Bush on February 1, 2006. Prior to Bernanke, Alan Greenspan, appointed in 1987 by President Ronald Reagan served as Federal Reserve Chairman for 14 years.

Grace Period

A Grace Period is a small time window that is allowed after the the due date on a bill for the payment to be made without any penalties. For example, if your bill was due Sept 15th and they allow a five day grace period, then you would have until Sept 20th to make the payment without incurring a late fee or other additional charges.

If the payment is made one day after the grace period, then it is considered late. Credit Card companies can charge late payment fees as well as raise your interest rate.

Credit card companies also offer a grace period in which you will not be charged interest. If you pay your balance in full by a particular date than you would not be charged interest for that month. However, if you fail to clear you balance than interest charges will be applied and carried over in to the next month as well.

There are no grace periods given for cash advances. Cash withdrawals always pay interest from the moment you make the loan. In addition, cash advances usually pay a higher interest rate than Missing Text Here?

Gold Card

Gold credit cards are usually associated with prestige. American Express first released its Gold Card in 1966. Eighteen years later they released the Platinum Card.

These cards carry a lot of prestige. Neiman Marcus, a very high end retailer, will only accept cash or American Express credit cards. These cards have a high yearly membership rate. The Gold Card carries a $125 yearly fee, while the Platinum Card carries a $300 annual fee. Furthermore, these cards do not have a limit. If you can demonstrate that you can pay the bill in full month after month, American Express will grant you unlimited charge access. These cards also offer additional perks such as travel insurance and concierge service as well.

Eventually, Visa and Mastercard came out with gold cards as well. These cards offer higher credit limits, lower interest rates and other perks like travel insurance and concierge service as well.

Index

In economic terms, an index is used to measure the success or failure of current economic conditions. An index is used to measure the changes that have taken place within a specified time period. Economic Indexes are expressed in percentage terms. Common examples of an index are the stock market index and the consumer price index.

In the United States the Consumer Price Index (CPI) is used to measure the average price of consumer goods and services. The CPI is commonly used to measure inflation.

Stock Market Indexes are used to measure economic indicators within different sectors of the market.

Broad-based indexes represent that stock market as a whole. The Dow Jones Industrial Average is a good example of an economic index.

Interest Rate

Interest is an up charge that is billed when an individual borrows money. Banks, mortgage companies and credit card issuers all charge interest for the money that they lend their customers. The Federal Reserve is responsible for lowering and raising interest rates. Credit issuers base interest rates they charge customers based on Prime Interest Rates set by the feds. All interest rates are based annually. This is known as the annual percentage rate or APR.

Interest rates can vary or they can be fixed as well. Variable interest rates go up and down based on the Prime Interest Rate. Fixed interest rates will remain the same within the time period stated in your agreement. Many credit issuers also charge introductory interest rates as a way to entice customers. These rates, usually very low, and expire within a short period of time.

Late Fees

Late fees are applied to credit cards when a cardholder fails to make his or her payment on time. Late fees are a major source of income for credit card issuers. In 2001 consumers spent 7.1 billion dollars on late fees alone.

Credit card companies charge anywhere from $15 to $35 depending on your balance. Furthermore, many credit card companies will also increase your interest rate as well. Credit card issuers report your late payment to the credit bureaus as well. This will reflect negatively on your credit score and will also might hinder your ability to apply for additional credit. In addition to possibly causing you to be rejected on future applications, late fees reported on your credit score will raise the rates that other creditors charge.

All payment mailed through the United States Post Office should be mailed well ahead of the due date. Do not give the credit card company any reason to charge you additional fees. Many times mail is delayed due to unforeseen circumstances. You can save yourself time and a stamp by making your payment online or over the telephone. Be aware that telephone transactions usually involve a small fee. You can avoid any charges by making your payment online.

Line Of Credit

A line of credit is a predetermined amount of money that you are able to borrow. This money can be used for whatever purpose you need. Businesses typically have a bank Line of Credit where they draw money from for every day expenses or for equipment or emergencies.

A credit card is another form of a Line of Credit. You apply for credit with a card issuer and they determine based on your credit history up to how much money they are willing to lend you. The credit card issuer also charges interest rates and other fees for issuing you this credit. They then issue you an actual credit card that can be used to make purchases. Once you receive and activate your credit card, you are able to use it as you wish. Always, remember to use your credit cards for wise purchases only. It is very easy to max out your credit and get caught in a cycle of paying interest only. Always, try to make more than just the minimum payment due so that you are paying towards your principle as well.

Another classic line of credit is example is a home equity loan also know as a HELOC. A home equity loan is a loan made against the equity in your house. If your house is worth $150,000 and you only owe $75,000 then if you have good credit you will be able to borrow up to 100% of the equity you have in your home. In this case you would be able to borrow up to $75,000. Texas is the only state that will not allow you to borrow 100%. Home equity loans in Texas are limited to 80% of the equity value that you have in your property . More often than not, home equity loans are used to finance major expenditures such as home improvements, college education or serious emergencies that require a large amount of money.

Always remember to use your line of credit wisely. Lines of credit are not free and can interest fees can add up to large amounts if you are not careful. People often forget how much they spend on their credit cards. Log on to your online account often so that you can keep track of your expenses. Lastly at the end of the month, avoid making minimum payments. The minimum payment will usually only cover interest while the principal remains the same.

Magnetic Stripe

The black strip on the reverse side of your credit card is the magnetic stripe. It also commonly referred to as the the magstripe. The magstripe is made up of tiny iron based particles. The magstripe also holds valuable information such as the card number, the expiration date, the cardholders name as well as available balance. The magstripe is swiped by a credit card reader that extracts this information in order to initiate a credit transaction. Credit cards, ATM cards as well as security badges use magstripes to hold sensitive information.

Minimum Payment

The minimum payment is the least amount that a creditor will allow you to pay towards your outstanding balance. Card holders should try to make payments that exceed the minimum. Many times the minimum payment made will only cover interest that is outstanding. Furthermore, if the amount is made for less than the minimum due, then late charges will apply.

Before making minimum payment, refer to your credit card terms and agreement to understand how the minimum charge is calculated. Many times consumers get caught in a cycle of making interest only payments. Although you will maintain your credit, you will also maintain the same principal that you started with. If you always make the minimum payment, you will never reduce the balance.

New Balance

The New Balance on a credit card statement is the amount that represents the most current outstanding balance. It is calculated by adding the previous balance with the current balance. For example if in May you have a balance due of $500 and you make a payment for $100 then the new balance on your next months statement will reflect the amount previously due plus whatever you have currently charged as well as interest and other fees (if applicable).

National Association of Purchase Card Professionals

The NAPCP, also known as the National Association of Purchase Card Professionals is a non profit organization dedicated to promoting the credit card industry. The NAPCP is responsible for holding conferences, educational seminars, networking opportunities, newsletters and are also actively lobbying in Washington DC on behalf of the credit card industry.

Prepaid Credit Cards

A prepaid credit card works much the same like a debit card. Your spending power is limited to your account balance. If you do not have sufficient funds in your account then you will not be able to charge. Visa and Mastercard are major issuers of prepaid credit cards.

Prepaid credit cards have a multitude of advantages. First of all, they do not pay interest. If you have bad credit you can use a prepaid credit card to increase your credit scores. In addition, parents can give their children a credit card that has limits. Employers can also issue prepaid credit cards to their employees to make use of as well. Parents and employers will also benefit from the ability to track purchases.

It is also very easy to re fill prepaid credit cards when your funds are running low. Many prepaid cards allow you to go to major grocery retailers or gasoline stations where you can add more money to your account. If you are fortunate enough to have another card, you can go online and add credit to your card as well.

Lastly, when shopping for a prepaid credit card, be sure to read the fine print. Many prepaid credit card issuers will charge you additional fees for using their cards. Some may charge a per transaction fee or even a monthly fee. Make sure that you have done your proper research and are able to choose a prepaid card that will best suit your needs.

Prime Rate

The Prime Rate is a set rate that banks use to base finance charges on. The Prime Rate is used to determine interest rates for credit cards, mortgages, auto loans and other types of credit. This rate is determined by the Federal Reserve and is usually set somewhere around 3 percentage points above the “Federal Funds Rate”. Interest rates will rise on fall based on the Prime Rate. The Wall Street Journal keeps an average rate that all banks charge on loans called a “composite prime rate”.

Personal Identification Number (PIN)

Your PIN number, as it is commonly referred to is essentially a password that is assigned to the cardholder and then changed by the cardholder to something that he or she will find more familiar. A PIN number is usually made up of four digits. Furthermore, this number should always be memorized for security purposes.

Cardholders are required to enter a personal identification number when using his or her credit card at any ATM locations. This prevents just anyone from being able to use your card and draw cash from the ATM. Retailers, especially gasoline stations require that credit card customers enter in their PIN number. This is always enforced when someone goes to pay at the pump. Your security PIN number prevents Fraud.

Rewards Card

There are many types of rewards credit cards available. Rewards credit cards offer incentives to customers by offering a “reward” for every time the card is used. Among the most popular types of rewards cards are airline miles cards and hotel rewards cards.

For example, every time you use your credit card to buy groceries or other necessities you can earn points towards the purchase of an airline ticket or a free night hotel stay.

Other types of reward incentives are offered as well including cash back discounts on all your credit card purchases. You can also earn discounts at participating retailers and gasoline stations.

Always remember to choose a rewards credit card that is going to suit your needs the best. If you are into home improvement, look for a rewards credit card that pays you double points every time you shop at Home Depot. Then you can turn around and use those points towards car rentals, cash back and even brand name merchandise. If you are a big outdoorsman you can take advantage of a Bass Pro Shop Rewards Visa credit card and earn points towards merchandise redeemable at the Bass Pro Shops.

Choose your rewards card wisely. Always read through the fine print to see exactly what is being offered. Watch out for introductory rates that offer very low rates. These rates will change once the introductory period has expired. Lastly, just make sure that you choose a rewards card that is going to best suit your needs.

Secured Credit Card

A secured credit card works just like a regular credit card, however, in order to obtain one you need to deposit to an escrow account that will guarantee your credit. For example, if you apply for a secured credit card and are required to make a $500 deposit, you will have $500 available in credit. So long as you continue to pay your balance on time, your $500 will remain in the escrow account. Furthermore, you can use this card wherever regular credit cards are accepted like restaurants, shopping, online purchases, etc.

People who have limited or bad credit can benefit from a secured credit card. The biggest benefit that these cards provide is the boost to your credit, should you pay it responsibly and on time. Secured credit cards report to the credit bureaus the same as non secured credit accounts. This credit history that you are establishing will eventually allow you to qualify for non secured credit cards and other types of credit including car loans and mortgage loans.

Lastly, always keep in mind that two credit card offers are not always created equal. Check the APR from offer to offer to find the lowest interest rate. Watch out for introductory rates, check the grace period and find the card that works best for you.

Sub Prime Borrower

A person who has less then desirable credit is considered a Sub Prime Borrower. These people are considered higher risk than other borrowers and typically pay higher interest rates than someone with stellar credit. A person with A FICO score of less than 650 are considered to be Missing Content Here?.

Variable Rate

Interest rates that fluctuate on a regular basis are considered to be on variable. Variable interest rate credit cards base their interest rate on the Federal Reserves Prime Rate. If the prime rate is 4, then they add a percentage on top of that, say 6.9%, then your interest rate becomes 10.9%.

This can be both advantageous and disadvantageous for the credit cardholder. The Prime Rate as it is set by the Feds can fluctuate on a regular basis depending on market conditions. Should the Prime Rate go higher, then so does the interest rate that you pay on that credit card. However, should, the Prime Rate go down, then so do your rates.

Consumers with less than perfect credit will typically qualify for Variable Interest Rate. A cardholder with a fluctuating interest rate is a much more profitable customer than someone whose interest rate remains constant. Those with decent and above average credit score ratings will save money versus those with poor credit.

Wall Street Journal Prime Rate (WSJ Prime Rate)

The Wall Street Journal Prime Rate or WSJ Prime Rate is the average interest rate between 30 of the largest banks in the United States. Every time 23 out of the 30 banks change their interest rates, then the WSJ Prime Rate is re computed.

Many banks use this rate to determine their own interest rates. This keeps interest rates within a certain limited spectrum. When this rate changes all loans follow suit. If the rate goes higher than car loans, mortgage loans and credit card loans will go up as well.