Definition of credit card

Credit Card
A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. Credit cards charge interest and are primarily used for short-term financing. Interest usually begins one month after a purchase is made and borrowing limits are pre-set according to the individual's credit rating.

Credit Card Balance
The amount of charges, or lack thereof, owed to the credit card company. A new credit card balance can take up to 24 hours to update, once a payment has been made, depending on the credit card company and method of payment involved. The balance can be zero, positive or negative, depending on if nothing is owed, if something is owed or if a payment is made over what is owed respectively.

Credit Card  Debt
A type of unsecured liability which is incurred through a short-term revolving loan facility. While, technically, all purchases made by credit card create a debt to the user, these debts typically do not incur interest until the grace period has expired. Thus, credit card users who pay off their balance each month are generally not considered to have credit card debt. Rather, the term applies to users who continue to carry a balance on their credit cards after the grace period has expired and the debt begins to bear interest.

Credit Cliff
A slang term referring to the compounding of a company's credit deterioration caused by provisions such as financial covenants, or events that trigger a change in the company's credit rating. These can put pressure on the company's liquidity or its business to a material extent.


Credit History

A record of a consumer's ability to repay debts and demonstrated responsibility in repaying debts. A consumer's credit history consists of information such as: number and types of credit accounts, how long each account has been open, amounts owed, amount of available credit used, whether bills are paid on time, and number of recent credit inquiries.  It also contains information regarding whether the consumer has any bankruptcies, liens, judgments or collections. This information is all contained on a consumer's credit report. 

Credit Inquiry
A transaction whereby a bank or other credit-issuing institution views an individual’s credit report in connection with a loan or credit card application. The purpose of a credit inquiry is to evaluate an individual’s likelihood to repay money that is lent to them (known as creditworthiness).
There are two main types of credit inquiries - a “soft” inquiry and a “hard” inquiry. A soft inquiry is normally initiated by the individual (such as checking one’s own credit report for errors) and is not recorded on the individual’s credit report. A hard inquiry is recorded on an individual’s credit report when a third party views the credit report in response to an application for credit.

Credit Repair
Credit repair is the process of fixing a bad credit report, for whatever reason it deteriorated in the first place. It may be as simple as fixing mistakes with the credit agencies. Identity theft may require extensive credit repair work. The second form of credit repair is to deal with fundamental financial issues, such as budgeting, and begin to address legitimate concerns on the part of lenders.

Credit Score
A statistically derived numeric expression of a person's creditworthiness that is used by lenders to access the likelihood that a person will repay his or her debts. A credit score is based on, among other things, a person's past credit history. It is a number between 300 and 850 - the higher the number, the more creditworthy the person is deemed to be.

Charge Card

A card that charges no interest but requires the user to pay his/her balance in full upon receipt of the statement, usually on a monthly basis. While it is similar to a credit card, the major benefit offered by a charge card is that it has much higher, often unlimited, spending limits.

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