While nearly everyone knows what a credit card is, most people are still unaware of the complicated processes and technical jargon associated with these mighty financial tools. Though the ease of availability of online credit card applications has brought in more new cardholders than ever before, many of these new customers are still vastly unprepared for the litany of credit card charges and fees. We would like to shed a light on 9 of the most complicated and commonly used terms applicants are sure to come across on their search for a credit card to apply for online.
Credit Card vs. Charge Card
Online credit card applications usually also include charge card options. Both of these are examples of cards that offer cardholders access to a credit limit. However, the major difference between a credit card and a charge card is seen in the repayment Credit cards offer the customer a fixed credit limit, which can be repaid every month either in part or in its entirety. Charge cards, however, do not carry a fixed credit limit. Instead, whatever the cardholder spends, they are expected to pay in full at the end of every billing cycle.
Monthly Minimum Payments
As the name suggests, a minimum monthly payment is the least possible amount that cardholders can pay in order to avoid late charges on their credit card bill. Minimum monthly payments are specified as fixed percentages of the outstanding balance and can be found in the online credit card schedule of charges. But it is strongly suggested that cardholders make payments in full, to avoid paying interest.
Security Deposit Cheques
In order to avail of a card’s credit limit, cardholders are required to deposit a security amount in form of an undated The card issuer will retain this security deposit amount till the card has been terminated and can make use of it any point of time to offset missed payments. When looking for a credit card to apply for online, customers should bear in mind that the higher the offered credit limit is, the higher their required security deposit amount will be.
Interest: Retail & Cash Advance
There are two forms of interest charged on a credit card. Retail interest is charged on all transactions, be it online credit card purchases or in-store expenses. Cash advance interest, on the other hand, is charged on cash withdrawals made with the credit card. Cash withdrawals with a credit card should be avoided as the interest on cash advances is generally pretty high.
Outstanding & Available Balance
When looking for a credit card to apply for online, customers may come across terms such as outstanding balance and available balance. These are not to be confused with one another. Available balance may also be referred to as the available credit limit and denotes how much of the card’s credit limit the cardholder may still avail of. Outstanding balance is the total amount the cardholder owes their credit card issuer. Minimum repayment amounts, interest and other associated charges are all calculated on this outstanding balance amount.
Late & Over-Limit Fees
The online credit card schedule of charges contains details on various fees and charges for the respective card. Two of the most commonly incurred charges are late payment and over-limit charges. A late payment charge is applied when the cardholder fails to make their monthly card payment by the stipulated due date. Late charges can be avoided by making a minimum monthly payment at the very least. An over-limit charge is applied when the cardholder makes purchases that exceed their available credit limit.
Caps & Minimum Spending
Online credit card advertisements often try to lure in potential customers by offering access to incredible benefits and loyalty programs. Nearly every such online credit card offer comes with some strings attached, usually in the form of caps and minimum spending requirements. Simply put, a cap is a limit or restriction on how much the cardholder can earn. Cash backs and loyalty points often carry monthly caps. Similarly, minimum spending requirement based offers are ones which are only unlocked after the cardholder has used their credit card to make purchases for the specified amount, usually within a set period of time.
Customers on the hunt for a credit card to apply for online should keep an eye out for 0% balance transfer programs. Most credit card issuers allow cardholders to transfer their outstanding credit card balance from other cards, consolidating all debt into one single account. Certain credit card issuers even offer 0% interest for the first 6 months, letting the cardholder clear away pre-existing debt at no extra cost.
No Liability Certificate
A No Liability Certificate or Letter is issued to cardholders that have cleared all their outstanding dues and terminated their credit card account. It is proof that the cardholder has no further liability for the account and is often required when leaving the UAE. The online credit card schedule of charges normally mentions the cost of such a letter or certificate.