An additional cardholder is an authorized secondary user added to an account by the primary cardholder. There are benefits to an additional cardholder, but also risks to the primary account holder.

An additional cardholder is an authorized secondary user added to an account by the primary cardholder. The additional cardholder generally gets to enjoy all the benefits of a debit or credit card account without any liability, which remains the responsibility of the primary cardholder. Added users may likely increase the number of transactions and the balance on your credit card, not to mention fees may be charged for adding additional cardholders.
Financial institutions will usually only require that an additional cardholder be 18 years of age. An additional cardholder is an authorized secondary user added to a credit card or other account by the primary holder. An additional cardholder is an authorized secondary user added to an account by the primary cardholder.

Additional Cardholder

Offered through banks, affinity cards tied to nonprofit and charitable organizations can create a passive stream of donations.

Susan G. Komen Customized Cash Rewards Visa Credit Card

An affinity card is a type of credit card issued by a bank and, most often, a charitable organization whose logo appears on the card. An affinity card—also known as a charity credit card—is a credit card issued by a bank in partnership with an organization whose logo appears on the card. An affinity card is a type of credit card issued by a bank and, most often, a charitable organization whose logo appears on the card. Also known as charity credit cards, affinity cards offer people an easy way to show their support for a favorite nonprofit while benefitting the organization financially at the same time. Each time the cardholder uses the affinity card to make a purchase, a percentage of the transaction amount is donated to the charity or organization by the bank.

Affinity Card

An American Express card is an electronic payment card branded by the American Express Company.

American Express Merchant Reference Guide — U.S.

What Credit Score Do I Need to Get an American Express Card?

Can I Spend Over My Card’s Credit Limit?

American Express Ranks Highest in Overall Customer Satisfaction Among National Credit Card Issuers

Wells Fargo Propel American Express Card

An American Express card, also known as an “Amex” card, is an electronic payment card branded by the publicly traded financial services company American Express (AXP). American Express cards are issued by American Express—a publicly traded financial services company—and are charge cards, credit cards, or prepaid cards. American Express cards are issued by American Express and processed on the American Express network. Annual fees for American Express cards tend to run high: $95 for the Blue Cash Preferred Card, $99 for the Delta SkyMiles Gold American Express Card, $150 for the Green Card, $250 for the Gold Card, and $550 for the Platinum Card. Many merchants accept American Express cards and are willing to pay the transaction fees associated with processing because of the advantages that come with offering American Express as a payment option to customers.

American Express Card

The authorization date is the date at which a credit or debit card transaction is approved by the credit card issuer.

The authorization date is the date at which a credit or debit card transaction is approved by the credit card issuer. The authorization date is the date at which a credit or debit card transaction is approved by the credit card issuer. Assuming the transaction is approved, the authorization date of the transaction would be the same date at which the customer presented their card for payment. If the merchant bank determines that the transaction cannot be authorized, either due to insufficient funds or for another cause—such as the card being marked for fraud—then it will refuse authorization and cause the transaction to be declined. The authorization date is the date at which a credit or debit card transaction is approved.

Authorization Date

An authorization only transaction is one in which a pending transaction is placed on the account of a card user, which is settled at a later date.

An Overview of Credit Card Processing Transaction Types

Table of Contents
What Is Authorization Only? In authorization only, the merchant does not concede the issuer’s authorization until the final value is adjusted for the close of the sale, which then sends funds to the merchant’s bank.
Authorization only is one type of transactional activity that can occur when a payment card is used. Most payment card transactions are standard, involving an immediate authorization and final completion at the point of sale.﻿﻿﻿﻿ Any company using payment card technology will have basic functionality to request authorization and make final concessions for their payment processing. In a standard authorization, the transaction is fully processed by the merchant at the point of sale and the funds are deducted from the cardholder’s account. Understanding Authorization Only
Common Transaction Types
Auth Only vs. Other Transactions
Authorization only is a type of payment card transaction that holds funds from a cardholder’s account for settlement at a later date.

Authorization Only

An authorized amount is a sum that a merchant transmits to a credit or debit card processor to ensure the buyer has adequate funds for the purchase.

An authorized amount is a sum that a merchant transmits to a credit or debit card processor to make sure the customer has the funds required to make a purchase—the approved amount of money to be charged. To obtain authorization for a purchase, the merchant must get the consumer’s approval and then confirm with the card issuer or issuing bank that the consumer has enough in available credit (for a credit card purchase) or a sufficient checking account balance (for a debit card purchase). For example, if you use your credit card at a gas station, you might see an authorized amount of $1 in the pending transactions section of your credit card charges when you access your account online. An authorized amount is a sum that a merchant transmits to a credit or debit card processor to make sure the customer has the funds required to make a purchase—the approved amount of money to be charged. An authorized amount is a sum that a merchant transmits to a credit or debit card processor to ensure the customer has the funds required to make a purchase.

Authorized Amount

An average outstanding balance is the unpaid, interest-bearing balance of a loan or loan portfolio averaged over a period of time, usually one month.

An average outstanding balance is the unpaid, interest-bearing balance of a loan or loan portfolio averaged over a period of time, usually one month. However, if a borrower’s balances are drastically changing over a short period of time due to debt repayment or debt accumulation, there will typically be a lag in total outstanding balance reporting to the credit bureau’s which can make tracking and assessing real-time outstanding balances difficult. Many credit card companies also use an average daily outstanding balance method for calculating interest applied to a revolving credit loan, particularly credit cards. The average outstanding balance for the loan over that period would be ($100,000-99,000)/2 = $99,500.
An outstanding balance is the total amount still owed on a loan.
This is the amount of a loan's principal amount (i.e. the dollar amount initially loaned) that is still due, and does not take into account the interest or any fees that are owed on the loan. Lenders typically calculate interest on revolving credit, such as credit cardsor lines of credit, using an average of daily outstanding balances.

Average Outstanding Balance

The average daily balance is a common accounting method where credit card interest charges are calculated using the total amount due on a card at the end of each day.

The average daily balance is a common accounting method that calculates interest charges by considering the balance invested or owed at the end of each day of the billing period, rather than the balance invested or owed at the end of the week, month, or year. **Previous balance method**: Interest charges are based on the amount owed at the beginning of the previous month's billing cycle.
**Adjusted balance method**: Bases finance charges on the amount(s) owed at the end of the current billing cycle after credits and payments have been posted.
An investor must understand how an institution's choice of accounting methods used to calculate interest affect the amount of interest deposited into his or her account. Interest charges using the average daily balance method should be lower than the previous balance method_,_ which charges interest based on the amount of debt carried over from the previous billing cycle to the new billing cycle. The most common methods are:
**Average daily balance method**: Uses the balance on each day of the billing cycle, rather than an average balance throughout the billing cycle, to calculate finance charges. On the other hand, the average daily balance method will likely incur higher interest charges than the adjusted balance method because the latter bases finance charges on the current billing period’s ending balance.

Average Daily Balance Method

Balance chasing is the practice by some banks of reducing a customer’s available line of credit as they pay down their credit card balance. 

Balance chasing is the practice by some banks of reducing a customer’s available line of credit as they pay down their credit card balance. But if the credit card issuer chases the balance and cuts the credit limit to $4,000 as soon as they pay, the credit used remains at 100% and their credit score will not improve. FICO scores take into account five factors to determine credit worthiness: payment history, current indebtedness, types of credit used, length of credit history, and new credit accounts. In general, payment history represents 35% of the score, accounts owed 30%, length of credit history 15%, new credit 10%, and credit mix 10%. Balance chasing means that instead of freeing up credit, the customer has less available credit due to the lower credit limit.

Balance Chasing

Balance protection is a form of credit card insurance that generally covers only the minimum monthly payments on a card’s outstanding debt.

4 Different Types of Credit Protection You Might Need

Mastercard Balance Protection | ATB Financial

Enhanced Balance Protection Insurance for Credit Cards—BMO

Balance protection refers to a form of credit card insurance that is also often called payment protection insurance. Balance protection is a type of insurance offered to credit card users, which promises to pay off the minimum monthly payment associated with the card’s outstanding debt balance. Financial experts often counsel that it is wiser to use any money you might spend on balance protection fees to pay off the balance on a credit card or to purchase life insurance that would help cover your financial obligations in the event of an accident or job loss. The pair decide to take the balance protection to be safe while actively trying to pay down their balance and then get rid of their balance protection insurance. Although some balance protection plans offer more generous coverage, most only provide the minimum monthly payments on the policyholder’s card, not the overall outstanding balance.

Balance Protection

A bank card association is an organization that licenses bank credit card programs an usually consists of a group of financial institutions. 

A bank card association is an organization owned by financial institutions that licenses bank credit card programs. In this sense, the bank card association handles all the critical and routine tasks involved with managing its own customers’ accounts, while also serving as a sort of outsourced “back office” for the companies and retailers that have paid the licensing fee to that bank card association. A bank card association is an organization owned by financial institutions that licenses bank credit card programs. The bank card association also performs operational functions for its members, including transaction processing and authorizations, interchange settlements and fee processing. After paying this fee, the company running this promotion or program can then use the bank card association name, logo and related collateral and resources.

Bank Card Association

A bank identification number (BIN) is the initial set of four to six numbers on a credit card that identifies the institution.

Changes to the Issuer Identification Number (IIN) Standard

What is a Bank Identification Code (BIC) / SWIFT code?

Table of Contents
What Is a BIN? This is a set of four to six numbers randomly assigned to debit cards, credit cards, charge cards, gift cards, electronic benefit cards, and other payment cards. After submitting the first four to six digits of the card, the online retailer can detect which institution issued the customer’s card including:
The card brand or Major Industry Identifier, such as Visa, MasterCard, American Express, and Diner's Club
The card level, such as corporate or platinum
The card type
The issuing bank country BINs are found on credit cards, charge cards, prepaid cards, debit cards, and gift cards. BINs help banks and financial institutions identify cards that have been compromised or stolen because it provides information about the type of card being used, the type of bank, and other information about the issuing company and cardholder.

Bank Identification Number (BIN)

Base I was the first electronic authorization system for credit card payments. It was developed in 1973 by Bank of America.

Prior to the development of the Base I system, credit card processing evolved alongside the growth of a national credit card system. Base II is a batched system - unlike Base I’s real-time activity, the settlement would take place periodically, and assess a settlement fee to merchants. Base I was first developed in 1973 as an electronic real-time authorization system for credit card transactions. As NBI and VisaNet launched and updated it’s system, MasterCard followed suit with a similar two-part processing platform, comprised of a system known as INAS to process transactions and INET to settle and clear balances.

Base I

The transmission of all credit card transactions on a given day is called batch credit card processing. Discover more about it here.

Batch credit card processing is the practice of a merchant processing all of its authorized credit card transactions for the day after the close of the business day, or at a time determined by the credit card processor. Batch credit card processing is the practice of a merchant processing all of its authorized credit card transactions for the day after the close of the business day, or at a time determined by the credit card processor. Batch credit card processing occurs when a merchant processes the entire day's worth of credit card transactions at the close of the business day, or at another specified time. During batch processing, the merchant sends the authorization codes for every credit card transaction to its payment processor, and the processor categorizes the transactions by the bank that issued each customer’s credit card. When credit cards are processed, the bank subtracts a fee for its role in the process, making sure the merchant gets paid for the transactions in that batch, and lets each customer’s credit card issuer know that the merchant has been paid so the issuer can post the transaction to the cardholder's account.

Batch Credit Card Processing

Behavior-based repricing occurs when a credit card company changes a credit card holder’s interest rate based on their repayment activity.

Credit Card Accountability, Responsibility and Disclosure Act of 2009

Behavior-based repricing is the practice of credit card issuers adjusting a credit card holder’s interest rate according to their payment history. As outlined in the Credit Card Accountability, Responsibility and Disclosure Act of 2009, a federal law that protects credit card users from unfair lending practice by card issuers, there are restrictions that credit card companies must adhere to with behavior-based pricing. Conversely, behavior-based repricing can be positive for the credit card holder if they work to establish a history of on-time payments and give the credit card company reason to lower the interest rate charged. Behavior-based repricing is the practice of credit card issuers adjusting a credit card holder’s interest rate according to their payment history. Behavior-based pricing is a tactic credit card issuers use to benchmark how much credit risk a credit card holder shows.

Behavior-Based Repricing

A billing statement is a monthly report that credit card companies issue to credit card holders that provides key information.

A billing statement is a monthly report that credit card companies issue to credit card holders showing their recent transactions, monthly minimum payment due, and other vital information. A billing statement is a monthly report that credit card companies issue to credit card holders showing their recent transactions, monthly minimum payment due, and other vital information. One section contains the cardholder’s previous balance, payments, and credits (how much money they’ve paid toward their balance plus any merchant refunds), the total dollar amount of new purchases made during the billing cycle that just ended, balance transfers, cash advances, fees charged, interest charged, and the new total balance. The billing statement also provides a cardholder with details on what to do if they notice a mistake on the billing statement, how consumers can make payments, and how the card issuer will handle those payments. The minimum monthly payment is generated by the credit issuer each month and allows the borrower to pay down their balance in order to keep their account in good standing and their credit line active.

What Is a Billing Statement?

A business guarantee is a credit card agreement where charges are the sole responsibility of the business rather than the business owner or employees.

The term “business guarantee” refers to credit cards in which the business itself—rather than its individual owners or employees—is responsible for repaying the debts incurred. By providing a business guarantee, the owners of a business are making a commitment that their corporation will be responsible for any unpaid debts incurred using the business’s credit cards. The term “business guarantee” refers to credit cards in which the business itself—rather than its individual owners or employees—is responsible for repaying the debts incurred. As part of this arrangement, Dorothy had to provide the credit card company with financial information about her business, so that they could assess the business’s level of credit risk. Because the credit card debts were guaranteed by the business and not its owners, the owners would not be personally liable in the event that the business defaults on its debts.

Business Guarantee

"Card reader” refers to the technologies used to detect the account number, cardholder information, and authorization code contained on a credit card.

A card reader is a device that can decode the information contained in a credit or debit card’s magnetic strip or microchip. By reading the information on the card’s magnetic strip, the card reader is able to quickly extract Emma’s name and account number, as well as the expiration date and validation code of her card. For example, the information obtained by the card reader must be passed on to the customer’s issuing bank, which is the bank through which they obtained their credit card or debit card. In finance, the term “card reader” refers to the technologies used to detect the account number, cardholder information, and authorization code contained on a credit card. If not for modern card readers, Emma or the barista would have had to physically copy the information from her card, and this information would have had to be stored by the cafe.

Card Reader

A card recovery bulletin is published by credit card issuers as a list of lost, stolen and counterfeit cards to help merchants detect and avoid fraud. 

Changes in U.S. Payments Fraud from 2012 to 2016: Evidence from the Federal Reserve Payments Study

A card recovery bulletin is a paper listing of lost, stolen, past-due, over-limit, counterfeit, or otherwise problem cards published by credit card companies such as Visa or MasterCard. Early tools used by card issuers and merchants to detect and prevent credit card fraud included card recovery bulletins. Card issuers publish card recovery bulletins_—_also known as cancellation bulletins, hot card lists, or restricted card lists_—_but they are typically used by non-U.S. merchants that lack computer or internet access. A card recovery bulletin is a paper listing of lost, stolen, past-due, over-limit, counterfeit, or otherwise problem cards published by credit card companies such as Visa or MasterCard. A card recovery bulletin is a pre-digital era method for merchants to learn whether a suspicious credit card has been stolen, is over-limit, or is a problem in other ways.

Card Recovery Bulletin

A cardholder agreement is a document given to credit card holders that details the rights and responsibilities of both the cardholder and the issuer.

Fair Credit and Charge Card Disclosure Act

A cardholder agreement is a legal document outlining the terms under which a credit card is offered to a customer. One day, she receives a notice in the mail that her credit card company has pre-approved her for a new credit card that features a much higher credit rating. As such, customers considering accepting a new credit card should carefully review their cardholder agreement in order to confirm that the actual provisions of the card are as advertised. Under the 1968 Truth in Lending Act (TILA), credit card providers are prohibited from making misleading statements about their offerings, and are required to clearly explain the terms and provisions of their credit cards in the cardholder agreement.﻿﻿ Through consumer protection legislation such as the TILA, credit card customers now benefit from relatively high standards of disclosure and transparency.﻿﻿ Nevertheless, reading the cardholder agreement remains an important practice.

Cardholder Agreement

A chargeback period is the time frame during which a credit card user can dispute a transaction with a merchant.

A chargeback period is the time frame during which a credit card holder can dispute a credit card transaction with a merchant. Chargeback periods vary by the payment processor and by transaction type but are typically 120 days following the initial purchase or delivery of the purchased goods.
Chargeback periods are important to merchants because they lose the money from the sale when the charge is credited back to the customer’s credit card account. A chargeback period is the time frame during which a credit card holder can dispute a credit card transaction with a merchant. When faced with a billing dispute, most consumers do not attempt to resolve the problem with the merchant first; instead, they simply request the chargeback through their credit card issuer, often with a simple click on the card account’s website. Processors often have shorter chargeback periods for problems such as the merchant providing unclear or illegible transaction information to the processor or accepting an expired credit card.

Chargeback Period

A charge card is a type of electronic payment card that charges no interest but requires that the statement balance be paid in full. 

Is a Charge Card Different From a Credit Card?

What Is the Difference Between Charge Cards and Credit Cards?

American Express Expands Popular ‘Pay It Plan It’ and Pay Over Time to U.S. Consumer Green, Gold and Platinum Cards

A charge card is a type of electronic payment card that charges no interest but requires that you pay the statement balance in full, usually monthly. Unlike credit cards, charge cards allow unlimited spending and don't charge interest, but they must be paid in full each month, which limits their use. Though many credit cards offer awards and perks, those offered with charge cards tend to be bigger. Despite the annual fee, some consumers prefer charge cards because they avoid the interest-related expenses that come with using a credit card. Because charge cards do not have a set spending limit, you can charge an unlimited number of purchases to your card.

Charge Card

A credit card charge-off rate is a measurement that shows the amount of defaulted credit card balances in comparison with the total amount of credit extended.

Charge-Off and Delinquency Rates on Loans and Leases at Commercial Banks

The credit card charge-off rate is a measure that shows the percentage of defaulted credit card balances in comparison to the total amount of credit outstanding. If a credit card company has tight lending standards, meaning it only lends to the most creditworthy consumers, it's likely to have a lower charge-off rate than companies with looser lending standards.
Charge-off rate data can be an important metric for investors considering investing in credit card companies. The credit card charge-off rate shows the percentage of credit card balances in default as compared to the total amount of credit outstanding. The credit card charge-off rate is a measure that shows the percentage of defaulted credit card balances in comparison to the total amount of credit outstanding. Credit card companies track credit card charge-off rates to monitor the performance of their credit card loans.

Charge-Off Rate (Credit Card)

A chip card is a plastic debit card or credit card that contains an embedded microchip. The chip encrypts information to increase data security.

How Amex Protects You Against Credit Card Fraud

Table of Contents
What Is a Chip Card?
How Chip Cards Work
Special Considerations
Types of Chip Cards
Benefits of Chip Cards Chip cards also are known as smart cards, chip-and-PIN cards, chip-and-signature cards, and the Europay, Mastercard, Visa (EMV) card. Embedded chips help merchants avoid card-present fraud, but other lines of protection must come from other methods to prevent card-not-present-fraud.
The chip makes transactions more secure by encrypting information when used at a chip-enabled terminal. In order to use the chip card, the cardholder inserts the card into a chip-enabled terminal such as an ATM or a point-of-sale (POS) terminal. A chip card is a standard-size plastic debit or credit card that contains an embedded microchip as well as a traditional magnetic stripe.

Chip Card

A chip-and-PIN card is a type of credit card in which the cardholder must authorize the transaction by entering their personal identification number (PIN).

The EMV Chip Card Transition: Background, Status, and Issues for Congress

A chip-and-PIN card is a type of credit card in which the cardholder must authorize the transaction by entering their personal identification number (PIN). As such, chip-and-pin cards are less susceptible to fraud than previous generations of credit cards.
Chip-and-PIN cards are credit cards with improved security features. Unlike previous cards which utilized a magnetic stripe containing information about the cardholder, chip-and-PIN cards contain a square-shaped microchip that generates and stores unique information for each transaction. In doing so, he emphasized that the new chip-and-PIN system would reduce the time required to verify past transactions, eliminate the risk of lost or faded receipts, and help protect customers from credit card fraud. A chip-and-PIN card is a type of credit card in which the cardholder must authorize the transaction by entering their personal identification number (PIN).

Chip-And-PIN Card

A chip-and-signature card is a type of credit card that encodes its information in a magnetic stripe as well as a square microchip.

The EMV Deadline and What It Means for Small Businesses

A chip-and-signature card is a type of credit card that encodes its information in a magnetic stripe as well as a square microchip. A chip-and-signature card is a type of credit card that encodes its information in a magnetic stripe as well as a square microchip. However, this method of payment is relatively vulnerable to credit card fraud, since there is nothing preventing a would-be credit card thief from simply using a made-up signature. When using the card, customers must enter their card’s microchip into the card reader and also provide their signature on the resulting receipt. If a merchant does not adopt chip-and-signature card technology, relying only on traditional magnetic stripe technology, it would be responsible for any fraud.

Chip-and-Signature Card

A closed loop card is an electronic payment card that a cardholder can only use to make purchases from a single company. 

A closed-loop card is an electronic payment card that a cardholder can only use to make purchases from a single company. When a customer applies for a credit card at a retailer, they may be approved for either a closed-loop card or an open-loop card. A closed-loop card, also called a single purpose card, will usually have the company’s logo on it, indicating where the card can be used, but it will not have the logo of a major payment processor like Visa or MasterCard. A closed-loop card is an electronic payment card for use with a single company, such as a gift card with a prepaid balance. Generally, electronic payment cards can be either closed-loop cards or open-loop cards.

Closed Loop Card

A co-branded credit card is sponsored by two parties: typically, a retailer and a bank or card network (Visa, MasterCard). It bears the logo of both.

Table of Contents
What Is a Co-Branded Card?
The Basics of a Co-Branded Card
Examples of Co-Branded Cards
Store Co-Branded Cards A co-branded card is a credit card that a retailer of consumer goods or services issues in partnership with a particular credit card issuer or network. A co-branded credit card is sponsored by two parties—typically, a retailer and a card issuer or card network—and usually bears the logo of both. With co-branded credit cards, cardholders may get merchandise discounts or rewards points when they buy from the sponsoring merchant, but can also use the cards at any other retailer that accepts that bank or card network. Often bearing the logos of both the credit card company and the retailer, co-branded cards earn merchandise discounts, points, or other rewards when used with the sponsoring merchant, but they can also be used anywhere the cards from that network are accepted.

Co-Branded Card

Convenience checks are blank checks provided by lenders that borrowers can use to access credit lines for purchases, transfers, or cash.

Convenience checks are blank checks that lenders, usually credit card issuers, offer to their customers. In some cases, the cash advance fee typically associated with the use of a convenience check may be exorbitant when compared with a standard credit card transaction that requires no added fee. Comprehensively, if the costs of the convenience check and balance transfer are higher than the actual interest costs saved then there can be a risk of loss on the difference plus the loss of time involved in handling the transaction. Some purchases with convenience checks may offer a grace period as a benefit with only a small fee to pay if the balance is paid in a short time. In general, there are three main purposes for these checks:
1.  To make a purchase when a check is accepted or required
2.  To facilitate a balance transfer
3.  To obtain a cash advance from the lender

Convenience Check

The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 is designed to protect card users from issuers' abusive lending practices. 

The Credit Card Accountability, Responsibility, and Disclosure Act of 2009

CFPB Finds CARD Act Helped Consumers Avoid More Than $16 Billion in Gotcha Credit Card Fees

Financial industry groups also criticize the law for driving up interest rates and annual fees; they also claim it's forced card issuers to lower card credit limits and increase customer qualifications, making it difficult for people with uneven or limited credit histories to obtain credit cards that will cover their needs. The act mandates that statements be mailed or put online no later than three weeks before the payment due date and that due dates be consistent (unless changed by the cardholder).
The CARD Act mandated the use of Schumer boxes (named for Senator Charles Schumer)—the easy-to-read tables that credit card issuers now use to clearly disclose important rate, fee, and term and condition information.
Since its passage in 2009, consumer advocates have argued that the law does not go far enough in prohibiting abusive or unfair practices. The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 is a federal law designed to protect credit card users from abusive lending practices by card issuers. Expanding on the Truth in Lending Act (TILA), the CARD Act was designed to protect consumers from the unfair practices of credit card issuers.

Credit Card Accountability, Responsibility, and Disclosure Act of 2009

Credit card arbitrage involves borrowing money at a low rate from a credit card, then reinvesting it in a higher-rate account to make a profit. 

Credit card arbitrage refers to the process of borrowing money from a credit card at a low interest rate and then investing that money at a higher interest rate to try to make a profit. The lowest risk and most common type of credit card arbitrage entails taking advantage of a zero percent introductory annual percentage rate balance transfer offer to borrow thousands of dollars from a credit card for the duration of the introductory period, which is often 12 or 15 months. Credit card arbitrage refers to the process of borrowing money from a credit card at a low interest rate and then investing that money at a higher interest rate to try to make a profit. However, your $100 will be taxed at both the state and federal level, and the interest income tax is higher than the more favorable capital gains tax rate.﻿﻿ So, for 2021, an investor in the 24 percent federal tax bracket with $100 in CD interest income will be taxed $24 at the federal level, plus whatever the investor’s state tax rate is. If you borrowed $5,000 from your credit card at a zero percent introductory rate but then failed to make the minimum monthly payment on the credit card balance, your arbitrage opportunity is most likely history.

Credit Card Arbitrage

Credit card authentication is one step in the electronic process of completing a purchase with a credit card.

Credit card authentication is the process of confirming the validity of a customer’s credit card by checking with the company that issued the card. Once the card issuer authenticates the card and authorizes the purchase, the payment is recorded on the customer's credit card account and paid into the merchant's bank account. In a credit card transaction, the merchant acquiring bank is also the settlement bank, receiving the payment funds and depositing them in the merchant account. In addition to the customer, an electronic payment transaction involves four entities: the merchant, the merchant's bank, a network processor, and the issuer of the customer's card. Most banks are members of the major card networks such as Visa and MasterCard, which enables them to act as merchant acquiring banks on behalf of businesses that accept credit card payments.

Credit Card Authentication

A credit card authorization key refers to an specialized code used in credit card transaction authorizations to confirm the purchase. 

A credit card authorization key is a code that is used to process credit card transactions. Once the payment processor has confirmed that the customer has sufficient funds to complete the transaction, the credit card authorization key is sent back to the POS system, causing the credit card transaction to be approved. When a customer pays with their credit card at the physical store, the POS machine transmits the card number and relevant transaction details to the cardholder’s issuing bank, and receives either an approval or a rejection of the transaction. A credit card authorization key is a code that is required to finalize a credit card transaction. Typically, credit card authorization keys are generated based on a combination of the credit card number and details from the transaction being processed.

Credit Card Authorization Key

A credit card authorized user is a person who has permission to use a credit card issued to another person. 

A credit card authorized user is a person who has permission to use another person’s credit card but isn’t legally responsible for paying the bill. If a person has no credit, or if their credit score is particularly low, they can potentially raise their credit score by becoming an authorized user of a credit card that the cardholder uses responsibly. For example, if one member of a couple is an authorized user on the other’s credit card and the couple splits up, the cardholder is legally responsible for covering any charges on the card if the authorized user refuses to make the payments. However, if the authorized user fails to make payments on time and the cardholder is either unaware of this or unable to step in and make the payments themselves in order to avoid a late payment, the cardholder’s credit suffers, due to a late payment on the primary cardholder’s credit history. Authorized users sometimes opt to simply pay the cardholder any money owed on the card, so that the cardholder can pay the balance, or the cardholder gives them access to the card’s account so that the authorized user can make the payments themselves.

Credit Card Authorized User

A credit card balance is the total amount of money that you owe to your credit card company. The balance changes based on when and how the card is used.

Credit Card Balance and Statement Balance: What’s the Difference?

Payment History: What It Is, and Why It Matters to Your Credit

A credit card balance is the total amount of money that you owe to your credit card company. To improve your credit score, consider talking to your credit card company to increase your credit limit, as this will decrease your credit utilization ratio. If you’re having trouble fully paying off your credit card balance each month, then it may be worth switching to one of the best balance transfer credit cards to secure a lower interest rate. If you have a credit limit of $5,000 and keep a balance of $4,000 on your credit card, then your credit utilization is 80%, which is extremely high. A credit card balance is the total amount of money that you owe to your credit card company.

Credit Card Balance

A credit card block is the reservation of a portion of a credit or debit card balance for the cost of services not yet rendered.

A credit card block is the reservation of a portion of a credit or debit card balance for the cost of services not yet rendered. A credit card block is the reservation of a portion of a credit or debit card balance for the cost of services not yet rendered. A credit card block is the reservation of a portion of a credit or debit card balance for the cost of services not yet rendered. If the cardholder does not pay attention to reservation language indicating that a credit card block may be employed, they may continue using the card despite not having a sufficient balance. Hotels use credit card blocking to ensure that the individual reserving the room is unable to spend the money that will be used in the future to pay for the room fee.

Credit Card Blocks

Credit card debt is a type of unsecured liability that is incurred through revolving credit card loans. It greatly affects your credit score.

Credit card debt is a type of unsecured liability that is incurred through revolving credit card loans. The aggregation of outstanding credit card debt from these trade lines is the borrower’s total credit card debt, which is used by credit bureaus to calculate their credit utilization ratio, an essential component of a borrower’s credit score. Since credit card utilization is also a factor in a borrower’s credit score, paying down substantial portions of outstanding credit card debt is one of the best ways a borrower can rapidly improve their credit score. Credit card debt is highly influential in determining a borrower’s credit score since it will typically account for a significant portion of credit utilization on a borrower’s credit profile. Lenders report credit card debt level balances to credit bureaus each month along with a borrower’s relevant credit activity.

Credit Card Debt

Credit card encryption is a security measure that is used to reduce thefts of credit card information.

Credit card encryption is a security measure used to reduce the likelihood of credit or debit card information being stolen. Credit card encryption involves both the security of the card, the security of the terminal where a card is scanned, and the security of the transmission of the card’s information between the terminal and a back-end computer system. For transactions that do not require a card to be scanned, such as an online transaction or in-app purchase, websites require both the credit card number on the front of the card and a CVV number located on the back of the card to be used. Credit card encryption is a security measure used to reduce the likelihood of credit or debit card information being stolen. Credit card encryption is a security measure used to reduce the likelihood of credit or debit card information being stolen.

Credit Card Encryption

Credit card funding is the use of a credit card account to provide funds to a new financial account or business venture.

Credit card funding is the ability to electronically fund a new account, business, or other venture by using a credit card. Credit card holders should review their card agreement to determine whether the card company considers credit card funding to be a cash advance. Some institutions that accept some forms of electronic funding may not accept credit card funding, but may accept funding via debit card. Credit card funding is the ability to electronically fund a new account, business, or other venture by using a credit card. Credit card funding involves using a credit card to fund a new account, business, or other venture.

Credit Card Funding

Credit card posting occurs when a cardholder transaction has been settled and recorded with a post date.

Credit card posting occurs when a cardholder transaction has been settled and recorded with a post date, which is created for all types of credit card transactions including purchases, payments, refunds, and chargebacks. Credit card posting occurs when a cardholder transaction has been settled and recorded with a post date, which is created for all types of credit card transactions including purchases, payments, refunds, and chargebacks. In some cases, the transaction date and the post date may be the same however usually the post date is often a day or more after the transaction date. The time that elapses between a transaction and post date is usually not a major concern for a cardholder unless the transaction is for a credit card payment. The time that elapses between a transaction and post date is usually not a significant issue for a cardholder unless its a credit card payment.

Credit Card Posting

A credit card teaser rate is a promotion in which a credit card issuer temporarily offers a below-average annual percentage rate (APR) on their cards.

A credit card teaser rate is a promotion in which a credit card issuer temporarily offers a below-average annual percentage rate (APR) on their cards. While credit card teaser rates can be attractive to consumers shopping for new credit cards, teaser rates can quickly land a consumer into hot water. A credit card teaser rate is a promotion in which a credit card issuer temporarily offers a below-average annual percentage rate (APR) on their cards. A credit card teaser rate is a promotional program in which the interest rate on the credit card is temporarily reduced. When determining what credit card teaser rates to offer, credit card companies weigh many different factors.

Credit Card Teaser Rate

Credit criteria describes the factors that lenders use to determine whether a prospective borrower is eligible for a loan. 

5 C's of Credit: What Are Banks Looking For?

Table of Contents
What Are Credit Criteria?
What Criteria Are Used to Assess Credit? The five most commonly used credit criteria are as follows:
The payment history of the borrower (35%)
Their level of credit utilization (30%)
The average age of the borrower’s existing credit accounts (15%)
The composition, or mix, of their credit accounts (10%)
Their number of recent new credit inquiries (10%)
These factors are assembled by the three top credit bureaus—Experian, Equifax, and TransUnion—and then fed into a credit scoring model that weights them by importance (as seen above) in order to produce a comprehensive credit score for the borrower—the credit score known as the FICO score (created by the Fair Isaac Corporation), in this case. Similarly, most credit scoring models will prefer applicants who have remained well within their overall credit limits (using more than 30% of your available credit is frowned upon) and have a long track record of responsibly maintained accounts. He notes that most banks prioritize factors such as the reliability with which the borrower has made their payments in the past, the overall level of credit used by the borrower, and the length of the time for which the applicant has been a credit customer. By ensuring that he and his cousin paid their credit card in full each month, Sal was able to demonstrate a reliable payment history while also building a track record as a credit customer.

Credit Criteria

The Credit Repair Organizations Act (CROA) is a piece of consumer protection legislation that regulates companies offering credit repair services.

Subchapter II–A—Credit Repair Organizations

Federal Trade Commission Report on Credit Education and the Credit Repair Organizations Act

The Credit Repair Organizations Act (CROA) is a piece of consumer protection legislation that regulates the behavior of companies offering credit repair services. Thankfully, the CROA helps ensure that companies in this sector advertise their services in a clear and transparent manner.﻿﻿ For that reason, it should be a simple matter to verify whether a firm is one of the best credit repair companies or just attempting to pull off a scam.
Kyle has struggled with credit card debts for many years, which has unfortunately caused his credit score to decline significantly. Companies in the credit repair industry help consumers by advocating on their behalf, communicating with credit reporting agencies in an effort to have negative information removed from the customer’s credit report. The agent from the credit repair company was careful to explain that, if he was so inclined, Kyle could also contact the credit reporting agency and perform this work on his own behalf. In communicating to the credit repair agency, he was told that they would carefully review his credit report and determine whether any of the negative information contained within it is inaccurate or attributable to fraud.

Credit Repair Organizations Act (CROA)

Issued by a financial company giving the holder an option to borrow funds, credit cards charge interest and are primarily used for short-term financing. 

Credit Card Accountability Responsibility and Disclosure Act of 2009

A credit card is a thin rectangular piece of plastic or metal issued by a bank or financial services company, that allows cardholders to borrow funds with which to pay for goods and services with merchants that accept cards for payment. Since both types of credit cards report payments and purchasing activity to the major credit agencies, cardholders who use their card responsibly can build strong credit scores and potentially extend their lines of credit and_—_in the case of secured cards_—_potentially upgrade to a regular credit card. In addition to the standard credit line, the credit card issuer may also grant a separate cash line of credit (LOC) to cardholders, enabling them to borrow money in the form of cash advances that can be accessed through bank tellers, ATMs or credit card convenience checks. Although it's typically easier for consumers to qualify for a store credit card than for a major credit card, store cards may only be used to make purchases from the issuing retailers, which may offer cardholders perks such as special discounts, promotional notices, or special sales. Individuals with poor credit histories often seek secured credit cards, which require cash deposits, that afford them commensurate lines of credit.

Credit Card

Credit card companies may refer to cardholders as deadbeats if they regularly pay off their entire balance each month.

Deadbeat is a slang term for a credit card user who pays off their balance in full and on time every month, thus avoiding the need to pay off the interest that would have accrued on their accounts.
A deadbeat is also called a "nonrevolver" or a "transactor." However, so-called deadbeats in the credit world also do not rack up bills they never pay, so they do not generate significant losses for credit card companies like real deadbeats, who do not pay their bills. One way they make money is that merchants pay about 3% of each credit card transaction in fees to the credit card company. Then, if they pay that balance in full and on time and do not allow the credit company to charge 10% to 30% in annual interest, the credit card company still earns money. And because deadbeats do not carry a balance and do not pay any interest, a rewards card that offers 1% to 5% back on purchases means a deadbeat can make money from using a credit card.

Deadbeat

The debt-to-limit ratio is the ratio of a consumer's total credit card balances versus total credit card limits, expressed as a percentage

The debt-to-limit ratio is a metric used to assess the creditworthiness of a borrower. The debt-to-limit ratio has many other names, including the balance-to-limit ratio, the credit utilization ratio, and the debt-to-credit ratio. When reading through her credit report, Emma discovers that her score was negatively affected by her debt-to-limit ratio, which measures the size of her total debts as compared to her combined credit limits. For example, a borrower with $5,000 of debt and a credit limit of $10,000 would have a debt-to-limit ratio of 50%. Borrowers who wish to improve their debt-to-limit ratios can use strategies such as aggressively paying off their outstanding debts, filing for increased credit limits, or using debt consolidation strategies.

Debt-to-Limit Ratio

A deceased alert is a notice that makes credit card companies, credit rating agencies, and other financial institutions aware that a person has died.

Credit Steps to Take After a Relative's Death

How Social Security Can Help You When a Family Member Dies

A deceased alert is a notification that makes credit card companies, credit rating agencies, and other financial institutions aware that a person has died. As an added precaution, Jane also contacts the Social Security Administration (SSA) to report the death while mailing additional copies of her father’s death certificate to the three major credit reporting agencies.﻿﻿ Lastly, Jane further reduces the risk of identity theft by canceling her father’s driver’s license and limiting the amount of personal information contained in his obituary. Although deceased alerts are typically issued by the credit reporting agencies, the families of the deceased may wish to notify their financial institutions directly to ensure they are informed of the death as soon as possible. To protect themselves against the risk of fraud, families should promptly contact their banks, lenders, and any other financial institutions at which the deceased person held accounts, formally requesting that they issue a deceased alert. A deceased alert is a notification that makes credit card companies, credit rating agencies, and other financial institutions aware that a person has died.

Deceased Alert

Descriptive Billing is a type of credit card billing that lists details of credit card transactions in a periodic report. 

Descriptive Billing is a form of billing customers for credit card transactions that provides details of each transaction. In particular, Regulation Z, implemented in the Truth in Lending Act of 1968, requires that if a credit card company does not include transaction slips in their billing, as in country club billing, the creditor is required to supply the cardholder detailed transaction information, including the date of the transaction, identifying information on the merchant which ran the transaction, and details on the goods or services transacted. Rules for descriptive billing practices are specifically addressed under Regulation Z.
While federal law governs the implementations and interpretations of TILA and its associated regulations, some states and industries have implemented stronger requirements and regulations regarding information disclosure and transaction reporting, providing both creditors and consumers with greater protections against inaccurate, unfair, or fraudulent practices. Of course, some customers and advocates resisted the shift to descriptive billing, favoring the sense of security and detailed transaction information provided by a paper trail, country club billing remained most secure only for in-person transactions. Regulation Z sets forth rules against misleading practices by creditors and lenders, requiring all lending industry parties to disclose terms to their customers in writing and to provide detailed information on all transactions so that customers are not misled about crucial billing details such as interest rates, finance fees, and unauthorized charges.

Descriptive Billing

A Discover Card is a credit card brand that is issued by the American financial services company, Discover Financial (DFS).

Discover Card is a credit card brand that is issued by the American financial services company, Discover Financial (DFS).
Originally issued by the retailer Sears Roebuck, & Co. in 1985, Discover cards first distinguished themselves for their reduced fee structure and pioneering cash-back rewards program. Discover Card is a credit card brand that is issued by the American financial services company, Discover Financial (DFS).
Originally issued by the retailer Sears Roebuck, & Co. in 1985, Discover cards first distinguished themselves for their reduced fee structure and pioneering cash-back rewards program. For instance, plain vanilla cards offer low fees in exchange for few if any rewards programs; while other cards, such as the “Discover it Cash Back” offered by Discover Financial, offer more generous rewards programs and cash-back benefits. The following Discover cards earn those Cashback rewards:
Discover It Cash Back
Discover It Balance Transfer Incentives to encourage customers to borrow more using their Discover cards, such as increasing credit limits or waiving annual account fees, make sense given Discover Financial’s overall business model.

Discover Card

A dormancy fee was a penalty charged by a credit card issuer to a cardholder’s account for not using the card for a certain period of time. 

A dormancy fee was a penalty charged by a credit card issuer to a cardholder’s account for not using the card for a certain period of time. The best way for consumers to avoid dormancy fees on bank accounts, electronic gift certificates, gift cards, and prepaid cards is to read all fine print carefully before purchasing a prepaid card or a gift card, or opening a bank account. Issuers can charge a one-time initial issuance fee on electronic gift certificates, gift cards, and general-purpose prepaid cards, but they cannot charge a periodic service fee for the privilege of holding such a card. Dormancy fees, also called inactivity fees, are no longer allowed in the United States under the Credit CARD Act of 2009.﻿﻿ However, credit card issuers are allowed to cancel a cardholder's account for inactivity of a year or longer. Dormancy fees still apply to some unused or inactive electronic gift certificates, gift cards, and general-purpose prepaid cards.

Dormancy Fee

Double-cycle billing is a now-banned practice of billing credit card customers by charging interest on the average debt accrued over the last two months, instead of just for the current month.

Double-cycle billing is a method for calculating credit card interest in which the interest is applied to the average of the prior two months’ outstanding balance. Accordingly, when charging his interest for the month of February, his credit card company included not just his average monthly balance for February, but also his monthly average balance for January—$2,000.
Kyle’s interest payment for February was therefore based on the average of $2,000 and $1,000—meaning $1,500. After all, if a customer paid off their full credit card balance in the previous month, they could still be charged interest on their previous month’s balance because the average for the two months would include the portion of the debt which they had already paid off. They could shop for credit cards that did not use double-cycle billing; they could try to maintain a consistent balance from one month to the next; or they could pay off their balance in full every month and pay no interest at all, which is always the best practice. Today, most American credit cards calculate interest using what is known as the average daily balance method, which is based on the average balance over the one-month charge cycle.

Double-Cycle Billing

An embossed card is an electronic payment card with imprinted or stamped details that can be felt above the card’s surface.

An embossed card is an electronic payment card with imprinted or stamped payment card details that can be felt above the card’s surface for taking a physical impression. An embossed card is an electronic payment card with imprinted or stamped payment card details that can be felt above the card’s surface for taking a physical impression. An embossed card is an electronic payment card with imprinted or stamped payment details that can be felt above the card’s surface. Embossed details on credit cards and debit cards typically include the cardholder’s name and the card number. Merchants may use embossed card devices when electronic terminals are down or when a card is damaged.

Embossed Card

EMV Chip is a global standard relating to integrated circuit cards, point-of-sale terminals, and automated teller machines, currently managed by EMVCo.

EMV® Chip started as a jointly developed global standard that allows interoperability between the cards with computer chips and terminals used by the largest financial services companies. EMV Specifications for card-not-present payments include EMV 3-D Secure (EMV 3DS), EMV Secure Remote Commerce (EMV SRC) , and EMV Payment Tokenisation. While the EMV Chip Specifications reduce the chance of fraud and nullify counterfeit cards for card-present transactions at point of sale terminals, they are limited in protecting card-not-present transactions. There are now nearly ten billion EMV Chip payment cards worldwide and 83.1% of all card-present transactions conducted globally used EMV Chip technology. EMV Chip Specifications describe the requirements for global interoperability between chip-based payment applications and acceptance terminals to enable secure contact, contactless and mobile transactions, and other emerging payment technologies (such as QR Code-based payments).

An expired card is a credit card no longer usable because its expiration date has passed. An expired card would be rejected if used for a purchase.

An expired card is a credit card that is no longer usable because its expiration date has passed. The credit card company will send the consumer a new card with a new expiration date several weeks before the existing card expires, assuming it wants to keep the consumer as a customer. Credit card issuers typically send customers a new card a few weeks before the old one expires, but consumers can also call to request a new card if their expiration date is looming. Cardholders with an expired card, or a nearly expired card, and who haven’t received a replacement yet, should call the number on the back of the card to ask the issuer for a replacement card. A data error could have caused the issuer to fail to send a new card, or a new card could have been lost or stolen, in which case the issuer can cancel that card and issue a new one.

Expired Card

The Fair and Accurate Credit Transactions Act (FACTA) is a U.S. resolution passed in 2003 that was aimed at enhancing protection measures for identity theft.

The Fair and Accurate Credit Transactions Act (FACTA) is a federal law enacted by the United States Congress in 2003. Red Flag Rules require creditors and financial institutions, such as banks and credit unions, to implement identity theft prevention programs that help detect and prevent identity theft. For example, a business that is required to confirm the identity or whereabouts of a customer in a more rigorous manner as a result of FACTA may need to request multiple forms of identification in order to meet certain provisions of FACTA. Unfortunately, identity theft is still on the rise as consumers’ social and purchasing patterns continue to move online.
As a result of FACTA, there were numerous reforms implemented related to the use and protection of consumer information. In addition to its provisions intended to reduce identity theft, FACTA also contained measures designed to bolster consumer protection mechanisms more generally.

Fair and Accurate Credit Transactions Act (FACTA)

Fleet cards are a type of payment card that allows businesses to manage expenses associated with the vehicles that they own and operate. 

Fleet cards are a type of payment card that allows businesses to manage expenses associated with the vehicles they own and operate. As noted above, companies may issue fleet cards to employees who are authorized to use company vehicles rather than have each employee use a personal card. Fleet cards, also known as fuel cards, act just like charge cards and are provided by major oil and/or specialized credit companies. Just like a regular payment card, fleet cards are embossed or laser-printed with details including the card number, expiry date (if applicable), company name and, in some cases, the name of the authorized user. Fleet cards are a type of payment card that allows businesses to manage expenses associated with the vehicles they own and operate.

Fleet Cards

A floor limit—also known as a “credit floor”—is the maximum charge that can be made to a credit card without obtaining prior authorization.

A floor limit—also known as a "credit floor"—is the maximum charge that can be made to a credit card without obtaining prior authorization. A floor limit is the maximum charge that can be made to a credit card without prior authorization. Historically, floor limits were set by stores and required making a physical imprint of a credit card. On the other hand, choosing a very low floor limit could risk frustrating her customers and increasing the time and labor required to complete sales. As such, a floor limit is designed to protect against the risk of credit card theft.