Tools and Resources
Glossary
Confused by all the financial terminology out there?
Here we've put together a simple glossary of financial terms that you
may encounter.
Glossary of Terms
A |
B |
C |
D |
E |
F |
G |
H |
I |
J |
K |
L |
M |
N |
O |
P |
Q |
R |
S |
T |
U |
V |
W |
X |
Y |
Z
- A
- Age Requirement
- To qualify for credit you must be at least 18 years old or have a parent
or guardian as a co-signer.
- Annual Fee
- A yearly fee added to your statement that some credit card issuers charge
you for use of the card.
- Annual Percentage Rate (APR)
- The Annual Percentage Rate is the cost of credit. When you open a credit
card account, you agree to pay a percentage of the outstanding balance
each month as a finance charge. The APR is the rate of interest you
are charged, expressed on a yearly basis.
- Available Credit
- Available credit is your credit limit minus your current balance. It
is the unused portion of your credit line.
- Average Daily Balance
- The average daily balance is a common way for card issuers to calculate
finance charges. The card issuer finds the balance each day of the billing
period, adds the daily balances together and divides by the number of
days in the period. The calculation includes new purchases and payments.
You should refer to your credit card issuer's Cardmember Agreement for
specific information and details regarding the calculation of the Average
Daily Balance.
- B
- Bad Credit
- A term used to describe a poor credit rating. Common practices that
can damage your credit rating include late or missed payments, exceeding
the limit on cards, defaulting on loans or declaring bankruptcy. "Bad
Credit" can result in the denial of future credit.
- Balance
- The total amount of money you owe the credit card issuer, including
any unpaid balance from the previous month, new purchases, cash advances,
and any other charges such as an annual fee, late fees or finance charges.
The "Balance" should not be confused with the minimum amount
due (the minimum payment allowed each month).
- Balance Transfer
- Transferring balances from one credit card to another, usually to take
advantage of a lower interest rate. Balance transfers are limited to
the available credit on the receiving card.
- Billing Cycle
- The number of days between your last statement date and your current
statement date.
- Billing Statement
- A monthly bill from your credit card issuer which describes and summarizes
the activity on your account including the outstanding balance, purchases,
payments, credits, finance charges and other transactions for the month.
- C
- Credit
- An amount of money that a bank or credit issuer lends to you. You can
charge/spend any amount from your credit line to make purchases or to
receive cash advances. As long as you pay the minimum amount due each
month by the due date, you can continue to use your remaining available
credit.
- Credit Criteria
- Factors used by lenders to rate the credit worthiness or the ability
to repay debt. They may include the following: income, amount of personal
debt carried, number of accounts from other credit sources and credit
history. A lender is free to use any credit related information in approving
or denying a credit application as long as they do not violate the Equal
Credit Opportunity Act which prohibits credit discrimination.
- Credit History
- Your credit history is a record of the way you manage your debt kept
by the credit bureaus in the form of a credit report. Banks and credit
issuers report your payment history to credit bureaus. When you apply
for new credit or a loan, the bank will check your credit history before
granting any credit. Information such as a missed or late payments will
be on your credit report for up to 7 years and bankruptcy filings can
remain there for as long as 10 years.
- Credit Limit
- The amount of unused credit that is available. Your credit limit is
your outstanding balance subtracted from your total credit line.
- Credit Report
- A credit report is a record of all of the information that credit bureaus
have collected about the way you've managed your finances over the last
7-10 years. It is the official record of how you pay money owed to your
creditors. It includes the names of companies that have lent you money,
your current account balances, and the timeliness of your payments.
The information on your report can either qualify or disqualify you
from obtaining credit cards, mortgages, loans, car or apartment leases,
and possibly employment.
- D
- Daily Periodic Rate
- The interest rate factor used to calculate the interest charges on a
daily basis. The factor is computed by dividing the yearly rate by 365
days.
- Deferred Payment
- Payments put off to a future date or extended over a period of time.
Interest will usually still accumulate during deferment.
- Dispute
- If you think your bill is wrong, write to your card issuer at the address
listed on your statement. You must write no later than 60 days after
you received the first statement where the error appeared. The credit
card issuer must acknowledge your letter within 30 days, and correct
the error or explain why they think the statement was correct within
two complete billing cycles, but no later than 90 days after its receipt
of your letter. You do not have to pay the amount in question while
it is being investigated, but you must pay the rest of your bill.
- Due Date
- The date a payment is due to a creditor. After that date, a late fee
can be charged and the payment can be recorded as late and the account
can be considered delinquent.
- E
- Equal Credit Opportunity Act
- Federal law that ensures you have an equal opportunity to obtain credit.
- F
- Fair Credit and Charge Disclosure Act
- A federal law that ensures creditors accurately disclose the terms and
costs of their credit.
- Fair Credit Billing Act
- A federal law that ensures creditors follow specific procedures regarding
customer billing disputes.
- Fair Credit Reporting Act
- A federal law that ensures fair and accurate reporting of credit information.
- Fair Debt Collection Practices Act
- A federal law that ensures that the collector of a debt uses fair and
reasonable means to collect the debt.
- Finance Charges
- The cost of consumer credit expressed as a dollar amount. It includes
any charges, such as interest and fees, paid by the consumer to the
creditor for obtaining a loan.
- G
- Grace Period
- A period of time between the transaction date and the billing date when
the transaction can be paid off without interest.
- H
- Household Income
- Income from all sources including wages, commissions, bonuses, alimony,
child support, social security/retirement benefits, unemployment compensation
or disability, dividends and interest. Look at your last federal income
tax return for your income sources.
- I
- Interest
- The rate that a bank or credit issuer charges for the money it lends
to you.
- L
- Late Payment
- Most credit card bills list the date by which payments are due. If you
miss the due date, the account is considered past due and you may be
charged a late fee. Late payments may be reflected on your credit report.
If you have paid late numerous times, it may be difficult to get additional
credit.
- Late Payment Fee
- A fee charged for failing to make the minimum monthly payment by its
due date.
- London Interbank Offered Rate (LIBOR)
- The measure of what major international banks charge each other for
large volume loans of Eurodollars (U.S. dollars on deposit in foreign
banks).
- M
- Minimum Amount Due/Minimum Payment
- The least amount you can pay by the due date and still meet the terms
of your card agreement.
- O
- Outstanding Balance
- The total amount that you owe on a credit card or other loan.
- Over the Credit Limit
- When the amount you owe is more than the limit on your credit line.
Any combination of purchases, cash advances, fees or finance charges
may cause you to exceed your credit limit.
- Over-the-Limit Fee
- A charge imposed for exceeding the assigned credit limit.
- P
- Past Due
- The status of an account when the minimum payment has not been received
by the due date.
- Periodic Rate
- The interest rate described in relation to a specific amount of time.
- PIN
- Abbreviation for Personal Identification Number, a unique number used
as an access code to ATM or debit machines.
- Posting Date
- The date that a purchase, cash advance, fee, service charge or payment
is recorded on your charge or credit account.
- Pre-Approved Credit
- An offer for a loan which you have been pre-selected based on specific
criteria the creditor has requested.
- Previous Balance
- The total balance due at the end of the last billing cycle.
- Prime Rate
- An index rate that determines the interest credit card issuers and banks
charge their customers. It is used in part to set the Annual Percentage
Rate (APR).
- R
- Revolving Credit
- A credit agreement that allows consumers to pay all or part of the outstanding
balance on a loan or credit card. As credit is paid off, it becomes
available again to use for another purchase or cash advance.
- T
- Transaction Date
- The date a purchase is made or cash is withdrawn. Some companies assess
interest from the transaction date, others from the posting date.
- Transaction Fee
- An extra charge for various credit activities such as using an ATM or
receiving a cash advance.
- V
- Variable Interest Rate
- An interest rate that changes based on an economic index such as the
prime rate.
- Z
- Zero Balance
- When the total outstanding balance is paid and there are no new charges
or cash advances during a billing cycle.
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