Glossary

This glossary covers technical terms used in the credit card industry. We will update it periodically.

Affiliated Merchant

Retail stores and other merchants that have agreements with a credit card company. Cardholders are able to make purchases and obtain services at merchants affiliated with their credit card company.

Affiliated Merchant Fees

Affiliated merchants pay a fee to the credit card company when cardholders make purchases with their credit card at that affiliated merchant. The fee is generally 2% to 5% of the total credit card purchase.

Affinity Card

Retailers and other merchants can issue their own branded credit cards under an agreement with a credit card company.

Allowance for Possible Credit Losses

We recognize an allowance for possible credit losses based on estimates of uncollectible receivables and a historical percentage of losses against the balance of total finance receivables including installment sales receivables and operating loan receivables.

ATM

Automated teller machines that perform functions including accepting deposits, dispensing cash, and providing account balance information.

ATM Acquiring Service

AEON Financial Service issues credit card cash advances through its cash dispensers and ATMs to customers of other credit card companies, for which we collect a fee from the credit card user’s credit card company. This fee income is called ATM acquiring service fees.

Auto Scoring

An automated system for statistically scoring the credit of customers who apply for credit cards. It provides an initial credit score using customer data including annual income, employer and tenure at the time of application, and a credit monitoring score for use and payment after card issue.

Cash Dispenser

An ATM that dispenses cash but does not accept deposits.

Credit Card Purchase Contract

Also called credit card shopping. The credit card company authorizes the issue of credit cards to cardholders, who may make purchases and obtain services at affiliated merchants by presenting their credit cards and signing the invoice. The credit card company pays the affiliated merchant on behalf of the cardholder, then obtains repayment from the cardholder.

Credit Monitoring

A risk management technique. It involves reviewing use and repayment after credit cards are issued. Objectives include adjusting credit limits, preventing defaults, and quickly detecting counterfeiting and credit card fraud.

IC Card

A plastic card with an embedded IC chip. This next-generation card holds more information than cards with a magnetic strip, and is highly secure against unauthorized use.

Installment Sales

Also called shopping credit. An installment purchase contract created each time a product is purchased at an affiliated merchant. This is also the term for installment purchases at AEON Financial Service’s overseas subsidiaries.

Installment Sales Receivables

Credit card shopping transaction volume among cardholders that is not yet due.

Operating Loan Receivables

Cash advances obtained by cardholders that are not yet due.

Revolving Credit

Cardholders may select in advance the option of installment payments with a minimum amount due each month.

Servicer

A corporation authorized by the Minister of Justice to operate a receivables collection business. At one time the loan collection business required a qualified attorney. However, the Servicer Law of 1998 enabled the collection of receivables without a qualified attorney if authorization is obtained from the Minister of Justice.

Usage Rate

The ratio of cardholders who use their cards to total cardholders. The annual usage rate is the ratio of cardholders who use their card more than once a year. Cardholders who use their cards are active cardholders.

WAON

AEON Group e-money first offered in April 2007. Convenience stores, fast food restaurants and other places that accept WAON continue to increase. Users receive a bonus of 1 WAON point, equivalent to \1, for each \200 (including tax) of WAON purchases.