5 Credit Card Acronyms You Need to Know
You’ve applied for a credit card, and you’ve read all the fine print, but you still don’t know what all of those acronyms stand for. Unless you work in the financial world, most people have no idea what they mean. Some of these terms can be very confusing. You know FICO is your credit score, but what does it really mean? Here is a quick guide and tips for credit card acronyms and understanding what they all mean.
Adverse Action Notice (AA Notice)
An Adverse Action Notice is a letter the lending company will send you explaining why you were turned down for a line of credit. Typically, you turned down because of information in your credit report. By law, they have to let you know what credit reporting agency was used to get the information as well as provide you with contact information for that agency in case you need to dispute something.
Annual Percentage Rate (APR)
Most people have heard of this one, but for those that have not, this is the interest rate the lender will charge you for carrying a balance on your credit card. If you are lucky enough to pay off your balance every month, you will not pay interest. However, if you carry a balance, then you will be charged an APR, which is based on your credit score. The better your credit, the lower your APR.
Card Verification Value (CVV)
Take a look at the signature bar on the back of your credit card. See that set of numbers? That’s your Card Verification Value or CVV. If you do a lot of online shopping, you’ll be asked to enter this number when you checkout and pay for your items. This number is used to keep credit card fraud down. Unless a scammer is able to get a hold of your card and see this number on the back, they should not be able to charge anything to your credit card fraudulently.
Fair Isaac Corporation (FICO)
Bill Fair and Earl Isaac developed the credit scoring system that has been in use since the 1950s. FICO is a combination of their last names. Your FICO score is a three-digit number between 300 and 800 that tells lenders where you land on the scale when you apply for loans and credit cards. The higher the score, the more likely you will be to get a good interest rate and loan term on whatever you borrow. Keep in mind that there are other factors that lenders look at besides your score when deciding.
Radio Frequency Identification (RFID)
Did you recently receive a replacement credit card that is a “chip” card? That is an RFID chip on your card. It stores information about your account and transmits that information and payment information to the retailer when you pay with your credit card. It also generates a random, single-use authorization code to the credit card reader that’s assigned to that transaction.
Understanding all of the acronyms used by the financial world can take some research, but hopefully, our tips for credit card acronyms get you started and makes things a little clearer.