Credit card companies, like others, have their own terms

With a wallet full of credit cards, the average American consumer is usually armed to the teeth when going shopping. But few people have even a clue about the terms used in their cardholder agreement, which generally goes unread by the people who should be most familiar with it. In part one of this article, we covered a few of the basic terms used by credit card companies in their terms of service. Here in part two, we will complete the list of things that every cardholder should know.

• Late fee - A charge assessed to the cardholder for failing to make the minimum monthly payment by the due date. Many companies require that the payment be in their offices by a particular time of day, such as 1 PM. If the payment arrives later, even if it arrives the same day, it is considered late and will trigger the penalty fee. Fees vary by lender, but often run in the $29-$39 range. Lenders will often use late payments as justification for raising their interest rates to the default rate.
• Minimum payment - The lowest amount of money that a consumer may submit towards paying off their balance. If this amount is not met, the card company may consider the payment late or unpaid, which will result in increased interest rates and penalty fees. This amount usually amounts to approximately 4% of the unpaid balance.
• Over limit fee - A fee, similar to a late fee, that is charged to the account of a customer who has exceeded the limit on their account.

• Preapproved - Credit card applications are often sent to potential customers stating that the customer is “preapproved” for the card. In fact, such approval consists of only a causal credit screen; the customer must still apply for the account and the amount of credit granted will be in accordance with that customer’s own credit score. In fact, the customer may not actually be ‘preapproved” at all and the card company has the right not to grant the account to the customer.
• Secured credit card - A card with a limit that is backed by a cash deposit that the customer has on file with the company. The company will pay interest on the money, but the customer may not spend more on the card than the amount of their deposit.
• Teaser interest rate - A temporary interest rate offered to new customers for new accounts. These rates are sometimes as low as zero percent, but they are generally temporary and subject to rather restrictive terms.
• Universal default clause - A clause in the cardmember agreement that states that the company may raise the customer’s interest rate if they make late payments to anyone, even if they pay their bill on time. A late payment to the phone company, for instance, may trigger this clause.

These are the most common terms to be found in the course of using credit cards.

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