It’s a fact. The financial industry uses lots of jargon which can be hard to understand. That’s why we’ve gathered some of these terms together in this glossary to help shed some light.
Let Sarah explain
Sarah Willingham founded letssavesomemoney.com and regularly appears on TV as a personal finance expert. In this video, she explains the things you need to know about Credit and APRs.
A credit card is a way of borrowing money. Essentially it allows you to make purchases online, around the world or in your local shop and then make the payments at a later date. It’s designed to make life easier as you can buy things now and spread your repayments later. You can use a credit card instead of cash or cheques wherever you see the VISA or Mastercard symbol. You can also use it to get cash from an ATM or cashpoint. You can choose to repay your credit card in full each month or make any payment as long as it is more than the minimum payment.
VISA and Mastercard own the international systems that allow you to use your card wherever you see their symbol – at over 35.9 million outlets worldwide. They also provide security systems to protect you from credit card fraud.
APR stands for Annual Percentage Rate. This is the total charge of credit on your account expressed as an annual rate. You’ll find it’s used across the whole UK financial industry to allow you to easily compare different products. When the APR is calculated, all interest and any monthly, quarterly or annual charges that apply either to purchases or for holding the card are accounted for and it is assumed that you maintain a balance over the year. If you ever want to check your APR, they’ll be on your statements. It may change from time to time, but we’ll always tell you in advance.
Some credit cards come with a yearly charge, or annual fee. This is what your credit card provider charges you for using the card and its service.
The contractual minimum payment is the smallest amount you need to pay to your credit card each month. You can always find your contractual minimum payment amount on your statement. Different credit cards can charge different amounts, and they change from time to time. At aqua, we currently calculate it as an amount equal to the sum of interest, default fees plus either 1% or 3.25% of the full amount you owe, as shown on your statement (minimum £5). If you owe less than £5 then you must repay the full amount. You will also need to pay any arrears or over limit amount, which are due immediately. Please remember to allow time for your payments to clear your account by the due date on your statement.
A CCJ means County Court Judgement. It’s issued by the court if you fail to make the payments stated in the contract of your credit agreement. If you can’t pay the full amount you owe at the time of the judgment, the courts usually set an affordable regular payment based on your individual circumstances. Generally if a CCJ is paid in full within 30 days of the date of the judgment it won’t appear in the credit register. CCJs can affect your credit history (more of that later) and they’re a matter of public record. They’re held for 6 years with the Registry Trust. If a judgment is settled after the 30 day period it will be entered into public record and will appear on credit searches against your name, normally affecting your credit rating.
When you take out a credit card, you’ll receive a Credit Card Agreement. This is basically a contract between the lender and you, the borrower. It’s really important to read it carefully as it tells you the exact terms of the agreement to lend the money to you - and when you sign it you agree to be legally bound to its terms.
PIN stand for Personal Identification Number. A PIN is a 4-digit code you type in at a cash dispenser (or ATM) to take out cash from your account. New Chip and PIN technology that has been introduced in the UK means that you now also need your PIN to make purchases. You must always keep your PIN secret and never reveal it to anyone – not even when you call our helpline. You will get a PIN when you receive your credit card, but for security reasons it should arrive shortly after you have received your credit card. You can change your PIN using the PIN change facility on any ATM and it will be changed with immediate effect.
Chip and PIN was introduced worldwide to help reduce fraud. Now, rather than signing a receipt when you buy things, you enter a 4-digit PIN into a keypad. It’s much more secure.