Credit Glossary
Affinity Card
A credit card endorsed by groups such as colleges, sports teams,
professional organizations, or special interest groups that are offered
to their alumni, fans or members. Typically, use of the credit card
gives financial benefit to the endorsing organization.
Annual Fee
A yearly bank charge for use of a credit card that is billed directly on
the customer's monthly statement.
Annual Percentage Rate (APR)
The interest rate reflecting the total yearly cost of the interest on a
loan, expressed as a percentage rate. Under the federal Truth in Lending
Act, it must be calculated in a standard way to allow consumers to make
"apples-to-apples"comparisons of lending terms.
Authorization
An Authorization occurs when you present your credit card or account
number to a merchant for payment. An authorization reserves the purchase
amount against your available credit to ensure that the credit is
available at the time the transaction posts to your account.
Average Daily Balance
This is a method by which many creditors calculate Finance Charges.
Adding each day's balance and dividing that total by the number of days
in a Billing Cycle determines an Average Daily Balance. The Average
Daily Balance is typically multiplied by the Periodic Annual Percentage
Rate in order to calculate the amount of Finance Charges assessed on an
account.
Available Credit
Available Credit is the amount of credit you have available to use for
Purchases, Balance Transfers and Cash Advances.
Automated Teller Machines (ATM's)
ATM's are self-service machines that dispense cash and process deposits.
Balance Transfer
A Balance Transfer is the process of transferring a balance from one
credit account to another.
Bankrupt
The status of being legally declared unable to pay your debts as they
become due. Federal bankruptcy laws have been enacted which allow a
person or organization to liquidate their assets to pay a reduced amount
to their creditors or which allow the rehabilitation of the debtor by
requiring creditors to accept reduced payments from future earnings of
the debtor. Declaring bankruptcy is generally considered a last resort.
Billing Cycle (Billing Period)
The Billing Cycle is the period between billings for products and
services - Normally a month.
Carrying a Balance
Carrying a Balance means the balance revolves on an account from one
month to another. When a cardholder carries a balance he/she does not
pay the balance in full every month.
Cash Advance
A Cash Advance allows you to obtain cash from your credit card account.
Please note there may be restrictions on the amount you may withdraw.
Typically, a Cash Advance is obtained through a financial institution or
an Automated Teller Machine (ATM).
Cash Advance Fee
A Cash Advance Fee is a charge by the bank for using a credit card to
obtain cash. This fee can be stated in terms of a flat per-transaction
fee or a percentage of the amount of the Cash Advance.
Cash Advance Limit
The Cash Advance Limit is the established limit by which credit card
holders can withdraw cash from their accounts. This limit is typically
established as a percentage of the Credit Line.
Credit Payment Insurance
Credit Payment Insurance is a credit protection service offered by some
creditors to their customers. It assists customers in maintaining a good
credit rating in times of financial difficulty.
Credit
A Credit on your statement reflects any monetary transaction other than
a payment that decreases your Outstanding Balance.
Credit Limit (Credit Line)
The Credit Limit is the total amount of credit extended to the customer
by the lender.
Credit Reporting Agency (Credit Bureau)
A Credit Reporting Agency compiles data on consumers' credit payment
history. Trans Union, Equifax, and Experian are the three major Credit
Reporting Agencies in the United States.
Credit Report
The Credit Report is a critical factor in credit scoring systems that
lenders use to issue credit cards, mortgages, or other loans. A Credit
Report contains information regarding a customer's payment history and
comes from a Credit Reporting Agency.
Creditor (Card Issuer)
A Creditor is an entity to whom money is owed.
Current Balance
The Current Balance is the total amount of credit spent on Purchases,
Balance Transfers, and Cash Advances. This balance may include Finance
Charges and fees.
Daily Periodic Rate
The Daily Periodic Rate is used to calculate the amount of Finance
Charges assessed on an account. It is typically calculated by dividing
the Annual Percentage Rate by 365.
Delinquency
A Delinquency means that payment is overdue on an account.
Finance Charge
Finance Charge is a fee for using credit. It is comprised of interest
charges and other fees.
Fixed Interest Rate
A rate of interest charged on an account. This rate is in effect for the
life of the loan, provided the account remains in good standing. This
rate will not fluctuate based on the Prime Lending Rate.
Grace Period
If the cardholder does not carry a balance, the Grace Period is the
interest-free period of time a lender allows between the transaction
date and the billing date. The standard Grace Period is usually between
20 to 30 days.
Introductory Interest Rate
A rate of interest charged on an account for a specific, limited period
of time. This rate is typically lower than the Ongoing Rate and is used
by the creditor as an incentive.
Late Fee
A Late Fee is a charge to your account if the minimum payment due does
not reach the lender by the payment due date.
Minimum Payment Due
The Minimum Payment Due is the smallest amount you must pay each month
to keep your account in good standing. Your minimum payment can vary
from month to month based on your current balance and is typically based
on a percentage of the Outstanding Balance. You can always pay more than
your minimum payment.
Ongoing Interest Rate
A rate of interest charged on an account for a period of time. This rate
can be either a Fixed or Variable Rate.
Over Limit
Over Limit refers to the amount of your balance that exceeds your Credit
Limit. If this occurs, an Over Limit Fee will be assessed.
Over Limit Fee
An Over Limit Fee is a charge for exceeding the Credit Limit on the
account.
Outstanding Balance
The total amount you owe the creditor.
Post Date
A Post Date is the date that the transaction was debited or credited to
your account.
Pre-approved
A credit offer with a "Pre-approved" status means that a potential
customer has passed the preliminary credit-information screening
necessary to obtain credit with the creditor.
Personal Identification Number (PIN)
A Personal Identification Number (PIN) is a secret number that
identifies you and allows you to perform transactions at ATM's.
Prime Lending Rate
Prime Lending Rate is a variable interest rate that is often used in
calculating the Interest Rate on a credit account.
Re-pricing
Re-pricing is the act of changing a credit card holder's APR.
Secured Card
A Secured Card is a credit card that a cardholder "secures" with a
deposit to ensure payment of the Outstanding Balance if the cardholder
defaults on payment. Secured cards are general-purpose credit
cards targeted to customers with imperfect or limited credit histories
who do not qualify for a traditional unsecured credit card loan.
Smart Cards (Chip Cards)
There are various types of Smart Cards, sometimes called Chip Cards.
Electronic chips allow these credit cards to function in different ways: as
credit cards, debit cards, frequent buyer or rewards program cards, I.D.
cards, or any combination. Many college I.D. cards are chip cards. These
may or may not be credit cards.
Transaction date
The Transaction Date is the date a transaction was initiated.
Variable Interest Rate
A rate of interest charged on an account. This rate may change and is
typically calculated by adding or subtracting an amount to a base
standard interest rate, usually the Prime Lending Rate.
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