Glossary of Financial Terms

Cardmember Agreement:

The issuer's written statement of Terms and Conditions relating to your credit card account. The Cardmember Agreement is required by federal regulations. The Agreement states the Annual Percentage Rate, the monthly Minimum Amount Due formula, annual fee, if applicable, and your rights in billing disputes.

Cash Advance:

A cash withdrawal at an automated teller machine, bank teller or by use of a convenience check. This cash is an instant loan from your credit card account. The credit card company may apply Interest Charges from the day you take the advance until the day you pay it off. A transaction fee may also be charged based on the amount of your withdrawal.

Cash Advance Fee:

A one-time fee for Cash Advances in addition to interest charges. This fee is usually a percentage of the advance amount.

Charge Card:

A card that requires full payment of the balance before the end of the billing period. It is not a line of credit and no interest is charged if you pay on time.

Collateral:

An asset pledged to a lender to guarantee repayment. Collateral could include savings, bonds, insurance policies, jewelry, property or other items that are pledged to pay off a loan if payments are not made according to the contract. Collateral is not required for unsecured credit card accounts. (See Secured Card).

Collection:

The referral of a Past Due account to a specialist in collecting loans or accounts receivable.

Consolidation Loan:

If you owe money to several creditors, you can combine your payments and balances into a single account with one creditor. This can be done in several ways. For example, you can transfer several high interest credit card balances onto one card with a lower rate. If you own a home, you can consolidate your debt with a low-interest home equity loan. Or, you can get a loan specifically designed for this purpose.

Co-sign:

To sign a credit agreement with someone and agree to share the debt with that person or assume the debt if the other person defaults and does not pay.

Co-signer:

A co-signer is a person who signs a loan or credit card with the primary applicant, pledging to be responsible for repaying the loan or debt in the event the applicant is unable.

Credit:

An amount of money that a bank or credit card issuer lends to you. You can charge or spend any amount from your credit line to make purchases or take Cash Advances.

Credit Bureau:

A credit bureau is a company that collects and sells information about how you manage your credit. Many banks and credit issuers regularly update the credit bureaus about your payment habits and how much money you owe. Potential creditors may check your credit report when you apply to rent an apartment or when you apply for a loan, credit card or even a new job. If you are denied credit, the creditor must tell you where they got the credit information. You have 60 days after credit denial to obtain your credit report free of charge.

Credit Card Debt:

The total unpaid balances on all your credit cards (not to be confused with the Minimum Amount Due you owe each month).

Credit Criteria:

Factors used by lenders to rate the credit worthiness or 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 that prohibits credit discrimination on the basis of race, sex and other factors.

Credit Freeze:

Prevents access to a consumer's credit report and limits the ability to open new accounts. To initiate a credit freeze, the consumer contacts each credit bureau directly. To temporarily lift or permanently remove a credit freeze, the consumer must supply a PIN.

Credit History:

Your credit history is a record of the way you manage your debt. It is kept by the credit bureaus in the form of a credit report. Banks and credit card issuers tell the credit bureaus about how you pay your debts. When you apply for new credit or a loan, the bank will check your credit history before granting any credit. Information such as 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 Line:

The maximum balance you can carry on your credit card account.

Credit Lock:

Prevents access to a consumer's credit report and limits the ability to open new accounts. Locking and unlocking credit is usually instantaneous and can be managed with a smartphone app. No PIN is necessary to unlock or relock credit. To initiate a credit lock, the consumer must contact each credit bureau directly.

Credit Management:

The way you handle the money you borrow from banks or credit issuers. For example, you should try to pay more than the Minimum Amount Due each month and make sure payments are received by the due date.

Credit Report:

A credit report is a record of all 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 the money you owe to your creditors. It includes the names of companies that have loaned 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.

Creditworthy:

You are judged to be qualified to have credit.

Equal Credit Opportunity Act:

A federal law that ensures you have an equal opportunity to obtain credit.

Grace Period on Purchases:

Many credit card issuers give you a Grace Period on Purchases if you pay your balance on your statement by the due date each month. If you don't, you may not get a Grace Period on Purchases until you pay the balance by the due date for two months in a row.

Income:

Income from all sources including wages, commissions, bonuses, alimony, child support, Social Security or retirement benefits, unemployment compensation or disability, dividends and interest. Look at your last federal income tax return for your income sources.

Inflation:

The gradual rise in prices of products and services. With a rise in inflation, a dollar invested or saved today is worth less than the same dollar yesterday.

Installment Loan:

A loan that you promise to pay back by paying the same amount of money on a regular basis, usually monthly, for a specific amount of time. For example, you might pay back an installment loan by paying $300 a month for 5 years. Student loans and auto loans are usually installment loans.

Interest Charges:

Interest Charges are the cost of consumer credit expressed as a dollar amount. They may include charges, such as interest and fees, paid by the consumer to the creditor for obtaining a loan.

Interest Rate:

The rate that a bank or credit issuer charges for the money it lends to you.

Late Payment:

Most charge and 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 on a credit card account for failing to submit the Minimum Amount Due by its due date.

Legal Judgment:

A court verdict that requires a person to do something, such as pay a debt.

Liability:

Liability is the responsibility for a loan or credit account. When applying for credit, you agree to be liable for any charges to your account, including purchases, fees and Interest Charges. For a credit card account, your liability is described in the Cardmember Agreement you receive from the issuer.

National Foundation for Credit Counseling (NFCC):

A non-profit organization dedicated to educating consumers in the wise use of credit. The NFCC is the umbrella group for Consumer Credit Counseling Service offices throughout the nation.

Past Due:

The status of an account when the Minimum Amount Due has not been received by the due date.

Periodic Rate:

The Interest Rate described in relation to a specific amount of time. For example, the monthly periodic rate is the cost of credit per month; the Daily Periodic Rate is the cost of credit per day.

PIN:

Abbreviation for Personal Identification Number, the number used as an access code to ATMs.

Posting Date:

The date that a purchase, Cash Advance, fee, service charge or payment is applied to your charge or credit account.

Pre-Approved Credit:

Credit card or a line of credit that is approved based upon available data, generally requiring only limited additional information to be supplied by the potential cardmember.

Prepayment:

When a portion or the entire amount of the principal of a loan is paid before it is due. This will usually reduce the total amount of interest that must be paid.

Previous Balance:

The total balance due at the end of the last credit card Billing Cycle.

Prime Rate:

The Prime Rate is the interest rate that some major banks charge to many of their best corporate borrowers. Each bank sets its own Prime Rate, though because the rate is so competitive, sometimes the rate is the same at all banks. The Prime Rate is reported daily in many publications, including The Wall Street Journal.

For consumer loans — including credit cards — banks and other lenders may use the Prime Rate as a base for calculating variable interest rates. For example, a credit card might carry an Annual Percentage Rate (APR) based upon the Prime Rate + 7.4%. If the Prime Rate today is 3.25%, the rate on the loan will be 10.65% (3.25% + 7.4% = 10.65%). If the Prime Rate drops to 3% when the price on the loan is next evaluated, the rate on the loan may go down to 10.4% (3% + 7.4% = 10.4%).

Principal:

Principal is the portion of a loan that represents the actual amount of money borrowed. Principal is separate from interest. In terms of credit cards, principal represents the price of purchased items or the amount of a Cash Advance.

Promissory Note:

A promissory note is a binding legal document that a borrower signs to obtain a loan. It lists your rights and responsibilities under the loan agreement, including how and when the loan must be repaid. Rights and responsibilities for credit card accounts are listed in the Cardmember Agreement.

Recession:

When demand in the economy decreases, prices of goods and services also decrease, resulting in a slowdown of the economy. When this slowdown becomes a long-term decline, this is known as a depression.

Reference:

A person who can vouch for your reliability, employment history or other factor needed to determine your Creditworthiness.

Revolving Credit:

A credit agreement that allows consumers to pay all or part of the outstanding balance on a credit card or line of credit. As the balance is paid off, it becomes available again to use for another purchase or Cash Advance.

Savings:

Money set aside so that it can be used later.

Secured Card:

A credit card that is collateralized, or partially collateralized, by a cash deposit held in a special savings account or certificate of deposit. Some banks may require that the deposit remain in the account until the Credit Line is closed or the bank decides security is no longer necessary.

The Credit Line on the card may sometimes equal the amount of the deposit. If a cardmember defaults on the card, the issuer may apply the deposit toward the outstanding balance.

Secured Debt:

Debt for which repayment is guaranteed through collateral property of equal or greater value than the amount of the loan. If you do not repay the loan, the issuer may take possession of the Collateral. Collateral may be an asset such as a car or a home or, in the case of a secured credit card, a cash deposit held by the issuer. For example, a mortgage is a secured debt in which the home is collateral. If the person fails to repay the loan, the bank may take the home as payment.

Semi-Annually:

Twice a year.

Unsecured Debt:

This is debt that is not guaranteed by Collateral, therefore, no assets are committed in the event of default. Most credit cards are unsecured.