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Credit Card Term Glossary

Confused by all the credit card jargon and terms? Feel like you need a credit card dictionary to really understand what many credit card providers or websites are really saying? We've put together a credit card dictionary that explains exactly what these terms and expressions mean in plain English.

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Above Base Rate (ABR)

The term used by some banks and building societies to describe the amount of interest they charge when you are overdrawn. If a bank has an ABR of 10%, you need to add on the current bank base rate, which is 4.25%, to work out the exact interest rate you are being charged -- 14.25% in this example.

Affinity Card

A credit card with links or an association with a charitable organisation. This means that each time you use your card, the issuer makes a donation to the charitable organisation you have chosen to support. However, affinity cards can come with a heavy price for the user - with interest rates of over 20%. This can be more than double the standard rate of cheaper cards. If you like the idea of an affinity card then make sure you pay off your balance each month.

Annual Percentage Rate (APR)

One of the most frequently used pieces of jargon used in relation to a credit card. APR refers to the full annual cost of your credit card (it is also used in relation to mortgages, overdrafts and personal loans). The APR includes all the extra charges you have to pay, such as a higher interest rate after an introductory rate, and is meant to help you compare one financial product with another. In relation to a credit card, the apr tells you the annual cost of carrying a balance on any particular card.

Banking Code of Practice

The Banking Code of Practice lays down a minimum set of service standards that you can expect your bank or building society to adhere to. It makes 11 key promises or commitments to customers about the way products and services are provided, how information should be given about your account and changes to it, data protection and how banks and building societies should behave if you find yourself in financial difficulties. Your bank, building society or credit card issuer will be able to issue you with a copy of the Banking Code of Practice.

Banking Ombudsman

The banking ombudsman is an independent arbitrator who will assess any complaint you have about your bank or credit card provider. You should always utilise your issuer's complaints procedure before contacting the banking ombudsman. The ombudsman has the power to award large amounts of compensation in certain cases, up to Ј100,000. Banks are duty bound to accept decisions by the banking ombudsman. The banking ombudsman can only deal with complaints about banks, not building societies, or other financial organisations who have their own similar scheme.

Base Rate

This refers to the interest rate that is set by the Bank of England. The Base Rate dictates how much we pay to borrow money and the interest we earn on savings. Interest rates on credit cards, mortgages, savings accounts all fluctuate by certain amounts as the Base Rate changes.