Glossary of Credit Card Terms

Below is a list of credit card and credit industry terms which can assist with reading credit card statements as well as the fine print on credit related documents.

30 Year Fixed
The average interest rate charged on a 30 year, non-jumbo, residential mortgage.
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Adjusted Balance
The issuer calculates a balance by subtracting payments or credits received during the current billing period from the balance at the end of the previous billing period.
Affinity Card
A co-marketed credit card that typically offers some type of incentive like rewards for cardholder loyalty. Both the issuer and brand associated with the card benifit financially from card use.
Annual Fee
The amount charged or fee for use of a credit card product for a calendar year.
Annual Percentage Rate (APR)
Acronym for: Annual Percentage Rate. This is the interest rate that a customer is charged on any outstanding balance over a given calendar year.
A form used for filling out personal credit information when applying for new credit. An application to a credit card issuer and subsequent approval is based on credit worthiness.
Application Fee
A fee associated with processing a credit card application. These are highly uncommon and should raise red flags with applicants who are requested to pay one.
Approval Response
This is the response period of time for a merchant when approving a transaction.
Acronym for annual percentage rate.
Authorized Amount
Within credit card transactions, this is the approved amount to be charged for a transaction and is deducted from the available open amount of credit.
Authorized User
This is someone who is connected with a credit card account and can charge freely. However, an authorized user is not the main account holder and isn't responsible for payment of charges incurred on the account.
A program with a bank or credit card provider that automatically takes money from an account. This is also referred to as "autodebit", and it is mostly used to pay recurring bills every month.
Available Credit
This is the amount of credit or money available for charge to an individual card account holder.
Average Daily Balance
A formula used by credit card issuers to determine the amount of interest charged over a given period of time (e.g. Month).
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Bad Credit
A term used to describe an individual's credit worthiness. Typically, an individual with a credit score of less than 620 would be considered a higher than normal credit risk and therefore, possessing bad credit.
A balance is the remaining amount owed after all payments or credits to a given financial institution for charges on the account.
Balance Chasing
A method used by some banks to lower available credit to account holders in an effort to curb spending and force them to pay down outstanding balances.
Balance Transfer
The movement of a credit card balance from one credit card to another credit card.
Balance Transfer Fee
The fee charged by a credit card issuer for transferring one balance from a credit card to another credit card. Typically a percentage of the total balance amount and is assessed each transfer.
Balance-to-limit Ratio
This ratio calculates the amount of outstanding credit available to an individual or business against the amount of credit used or current outstanding balances. The lower the ratio, typically, the lower of a credit risk.
A financial institution that is in the business of providing credit and other financial services.
Bank Holding Company
A company or firm which holds a majority control in one or more US banking entities. Each credit card issuer has a parent bank holding company which oversees their operations. Bank holding companies are supervised by the Federal Reserve Board.
Basis Point
One hundredth of one percentage point. If an interest rate increases by 2.0%, this equates to 200 basis points.
Billing Cycle
The length of time between statement dates.
Billing Statement
An official notice or statement which outlines all transactions, payments, interest charged and fees for a given individual or business account. This is sent by mail or e-mail depending the account holder's preference. Also referred to as a Periodic Statement.
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Card Issuer
Any financial entity that issues credit cards to card holders.
Card Member
Also referred to as an account holder. This individual or business entity is authorized to use a credit card.
Card Member Agreement
The card member agreement is a binding agreement which outlines the terms and conditions of a card holder's account. Federal law requires financial institutions to disclose all related financial formulas for using a credit card as well as resolution practices.
Cash Advance
Cash advances from a credit card are considered a direct loan. Different rates and fees apply versus a card holder's regular APR. These tend to have very high interest rates and can result in significant interest amounts very quickly.
Cash Advance Check
A check which is used to receive a cash loan against the available credit on a credit card. Sometimes these are referred to as convenience checks.
Cash Advance Fee
A fee associated with requesting cash from the available credit of a credit card. Typically, these cost $50 to $75 and aren't connected with a percentage amount fee.
Cash Advance Rate
The interest rate charged on the cash received from a cash advance on a credit card. Typically, these rates are double the purchase or balance transfer interest rate.
Cash Card
Cash cards contain funds already placed in an account which is not tied to an individual banking account and can be withdrawn from ATMs. They can also be used to make purchases at retailers.
Charge Back
A charge back is a returned transaction from the receiving bank back to the merchant. Charge backs are typically related to purchase disputes in which a bank customer doesn't recognize a charge or is disputing it with a merchant.
Charge Card
A charge card requires that the full outstanding balance be paid after each billing cycle. Contrary to credit cards, charge card balances cannot be paid over time.
Charge Off
The value of noncollectable credit card balances which are applied to a bank's loss reserves. Most credit card companies seek collection of past due accounts for up to 6 months.
Charge Off Rate
The percentage of total outstanding credit card balances which have been deemed as noncollectable by the issuing firm.
Chip and Pin Cards
A smart card which uses computer chips to collect and submit information versus the industry standard magnetic strip.
Closed Loop
A gift or credit card which can only be used in a select or grouping of specific locations.
Co Signer
An additional person who agrees to be liable for any outstanding loan if it cannot be serviced by the main signer on the account.
Co-Branded Card
A dual marketed credit card by a bank and consumer brand. Examples include airline mile credit cards or department store credit cards.
Concierge Service
An extra customer service benefit intended to assist with hospitality services such as travel arrangements, dinner reservations and tickets to a local show.
Consumer Credit File
A consolidated report which contains an individual’s existing credit accounts, payment history and whether or not they have filed for bankruptcy or have existing liens against them. Consumer Credit Report Referred to by the Federal Reserve as a G.19 report. A credit report is the common term used to describe the official credit history of an individual with a valid social security number. Credit Reports are updated monthly by credit bureaus such as TransUnion, Experian and Equifax.
Convenience Checks
Checks which can be drawn against an individual’s available credit line. Convenience checks are typically considered cash advances and hold higher interest rates than standard credit card rates.
Credit Bureau
A company which collects credit information to be accessed by companies to assist lenders with gauging an individual’s credit risk.
Credit Bureau Risk Score
A score assigned to an individual’s credit history to evaluate their credit worthiness versus the rest of the population.
Credit Card
A form of payment accepted by merchants during the point of sale to process payment for goods and / or services. Credit card holders may have the option to pay merchant balances over time.
Credit Card Act 2009
Credit Card Accountability, Responsibility and Disclosure Act of 2009 Also known as the Credit CARD Act of 2009, this act instated a requirement on existing credit card owners to give advanced notice on important changes on credit card terms at least 45 days in advance which gives consumers 21 days for paying bills. The law was signed in May 2009, but took until February 22, 2010 to be fully instated.
Credit Card Number
A series of digits that connects the owner with his/her card. The first six numbers relate the card to the issuer identification number (Visa, American Express, etc) The left over numbers are original to each card. The digits are imprinted onto the cards for machines that take imprints of cards instead of swiping them.
Credit Counselor
The purpose of a credit counselor is to help customers escape debt by encouraging a debt management plan organized by creditors. Consumers are recommended to stay with credit counselors who are associated with nationally recognized agencies by financial experts.
Credit Freeze
A credit freeze is an option consumers have to lock their credit making it impossible to open new accounts. It is commonly used when identity theft has occurred or is thought to have occurred. Fees are usually incurred for credit freezes unless proof of identity theft is available. There is also a charge when a consumer decides to reactivate the account or “thaw” the account.
Credit History
Credit History is a record of an individual’s past borrowing and repaying of money. It is managed by three main credit bureaus: Experian, TransUnion, and Equifax. The information is brought together to create a credit report. The report is used by credit card companies in deciding whether or not to issue an individual with credit and how much. The Fair Credit Reporting Act is responsible for keeping the information on consumer’s credit reports.
Credit Inquiry
Credit inquiry begins when a consumer is applying for a loan of some sort. A particular lender can research the credit history of the potential client by checking his/her credit report. Every time there is a credit inquiry it is documented and multiple inquiries can report negatively on the individual’s credit scores. For more information see soft inquiry and hard inquiry.
Credit Life Insurance
A policy designed to insure the balance of the primary cardholder is repaid in the case of death. This insurance can be purchased upon being issued credit by the primary cardholder.
Credit Limit
The credit limit is the maximum amount of money that can be spent on a credit card. The credit limit on a card can be negatively or positively influenced by the credit scores. Minimum borrowing on credit leads to a higher credit score.
Credit Line
A credit line is how much money can be put onto a credit account. The credit line is largely influenced by the consumers credit score. A good credit report leads to a higher credit line.
Credit Monitoring Service
A credit monitoring service is one that watches the activity of the credit card holder. If unnatural or out of character charges occur, the service notifies the card holder. This service is usually billed to the consumer monthly or annually.
Credit Obligation
A credit obligation is a legally binding contract that a consumer signs upon borrowing money that says the loan will be paid back. An example of a credit obligation is an installment loan such as a loan for a car.
Credit Rating
Credit rating is a calculation of the past behavior of a borrower. It is a combination of income, employment, and history of repayment and is a way for a potential loaner to have an idea of the likelihood of repayment.
Credit Report
A credit report is a collection of information on the history of a credit holder. It is a combination of credit inquiries, borrowing history, and the payment behavior of the individual. They are derived from complicated formulas that are used by possible lenders in determining the credit worthiness of a possible client.
Credit Reporting Agency
There are three main agencies, Experian, Equifax, and TransUnion and they are responsible for organizing and reporting information about an individual. They use the payment behavior to create a credit report.
Credit Score
A credit score is a numerical combination of three numbers that are compiled from formulas using a person’s credit history and how timely they paid off their debt. The lower the number the more likely an individual is to be turned down for a loan. The higher the score the more likely an individual or a business is to receive better rates on a loan. FICO is known for its use of credit scores and its formula for credit score is the most often used.
Credit Union
A credit union is a group of people that can compile their assets and provide credit cards to an individual or business. The group of people usually has a bond by concentration, location or employment.
Credit Utilization Ratio
Credit utilization ratio is a comparison of an individual’s credit card balance and the credit limits. The lower the ratio the better, meaning that there is little debt but a good deal of credit is helpful for a credit score.
Currency Conversion Fee
A currency conversion fee is also known as a foreign transaction fee. It a charge on a credit card when it is used in a foreign country in a foreign bank.
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Debits are, in terms of consumers, a charge put onto an account. When an individual has a checking or savings account, he or she can use a debit card to take money out a particular account in the bank. They can be created by writing a check, using an ATM or purchasing something from a merchant.
Debit Card
A debit card is different from a credit card. A debit card is used to take money from a particular account. The money is already there whereas a credit card is used to create a loan. The credit card bill is paid at a later point. In order to use a debit card, an individual is asked to punch in a PIN or signing.
Debt Consolidation
Debt consolidation is a way to centralize your debt in order to lower your monthly payments and interest rate.
Debt-to-Income Ratio
Debt to income ratio is a personal measure of the amount of money you earn (gross income) to the percentage that is paid towards debt. This comes into play when applying for a mortgage. The higher the debt being paid off, the more likely it is for an individual to pay a higher rate for his/her mortgage.
Debt-to-limit Ratio
The debt-to-limit ratio is a comparison of an individual’s credit card balance and the credit limits. The lower the ratio the better, meaning that there is little debt but a good deal of credit, is helpful for a credit score.
Default APR
A default APR( annual percentage rate) is an interest rate that can be applied to your credit card payment if you are late making a payment. It is also called a penalty rate.
Default Rate
A default rate is an interest rate that is very high. It usually occurs when an individual is late making a payment or a card holder does not follow the terms and conditions on the card. It is also called a penalty rate.
Deferred Interest
Deferred interest is usually advertised on car commercials saying “pay no interest until…” It is a payment plan that offers to postpone interest until a certain date. Once that date hits though, the interest that has been accruing is added to the account.
Deleveraging is an attempt to lower the financial leverage that is in place. It is done by paying off loans or debt.
Delinquent Account
A delinquent account is one that is past due but in the case of a credit card holder, it is usually not reported unless it is past 30 days overdue. For example, in a student account at a university, if the payment is not received by the due date it is considered a delinquent account and is subject to a monthly penalty fee.
Discount Rate
A discount rate is a charge, usually between 1 and 3 percent, that merchants must pay to credit card companies in order to use generally accepted credit cards.
Dormancy fee
This fee was imposed on credit card accounts that had not been used in a long time or were dormant. If an account was considered inactive, the card company would apply the fee to the account to boost their income. It was popular in 2009 and part of 2010, but was banned when the final rules for the law came out. It is also known as inactivity fees.
Dormant Account
A dormant account is one of inactivity or no use at all. In some cases, if a certain amount of time has passed of inactivity, credit card issuers will close the account. It is also known as an inactive account.
Double-cycle billing
Double-cycle bulling a way to calculate how much interest must be paid on balances left on credit cards from month to month. It considers the current balance on the credit card and the average daily balance from the previous billing period. It was banned by the Credit CARD Act of 2009. It is also known as two-cycle billing.
Due Date
A due date is when a credit card bill is required to be paid by. If the bill does not arrive, or has not been posted by the date it is due, a late fee will be imposed. Some companies allow their customers to set their own due dates so as to avoid late payments.
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Electronic Funds Transfer Act
The Electronic Funds Transfer Act is federal legislation that determines what is appropriate and inappropriate for customers who transfer their funds electronically. It was passed in 1978 by US Congress to establish the rights and liabilities of the customers.
An encryption is a way to securely transport credit card information across the internet or credit card processing networks. It is a code on the card that keeps it secured.
Equal Credit Opportunity Act
The Equal Credit Opportunity Act is a US law enacted in 1974 that makes it impossible for a creditor to discriminate in lending against any applicant. it allows consumers to lend in all ways including via credit cards.
Expired Card
An expired card is one with an encoded or printed date on it that make it unusable after stated date. The date of expiration varies depending on the policy of the card company.
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Fair Credit Billing Act
The purpose of the Fair Credit Billing Act is to protect credit card owners from unfair billing and to give a mechanism of appeal for said errors. Examples of the errors would be: charges of the wrong amount, charges not actually made by the consumer, items not received by the customer, charges for damaged goods on delivery, statement mailed to the wrong address etc. A consumer is able to dispute a particular charge by mailing his or her name to the address on their credit card statement that says "billing inquiries". The dispute must be made within 60 days. The credit issuer should acknowledge the dispute within 30 days, and within 90 days make the correction if needed.
Fair Credit Reporting Act
The Fair Credit Reporting Act, which was a 2003 amendment allows customers the privilege to receive free copies of their credit reports each year from the three major credit bureaus. The Act regulates how credit bureaus correct, maintain, and share information on the credit reports. It sets a base of consumer credit right, and allows consumers the right to have inaccurate information removed from the files.
Fair Isaac
A Fair Isaac is first name FICO was known for. The company provides credit scores along with decision making services and is intended to help financial services companies. The Fair Isaac changed its name to FICO in 2009.
FAKO score
A FAKO score is used to describe a score that is not associated with a FICO credit score. If a consumer purchases his or her score from anywhere but the score would be considered a FAKO score instead of a FICO score.
Federal Deposit Insurance Corporation
The FDIC is a federal agency that was created by Congress to assure a consumer that deposits will be made, and that a consumer has protection for his or her money, and that financial institutions are stable. It requires banks to have a certain amount of capital available at all times and insures its depositors that they will be insured up to $250,000.
Federal funds rate
The federal funds rate is an interest rate that banks will lend balances capital, usually overnight, to other depository institutions. The rate of interest is decided between the two banks and is the weighted average through all transactions. It is important to to credit card holders with different credit rates. The federal funds rate is three points higher than the prime rate (the credit rate that is charged by banks to their customers; it is usually the same through major banks) and usually changes in direct correlation to the prime rate.
Federal Trade Commission
The Federal Trade Commission is in promotes fair and free trade for the consumer. It prevents price-fixing agreements, false advertising, illegal combinations of competitors etc.
FICO was founded in 1956, it is a type of credit score. It is a three digit value that shows the risk of a credit borrower. A consumer's score ranges from 300 to 850; the higher the score, the better. Usually, a person with a low FICO score can expect to have higher interest rates on loans.
Finance Charge
A finance charge is a fee associated with the cost of borrowing. It includes the cost of interest and additional fees. The charge will be a numerical dollar value.
Fixed Rate
A fixed rate or APR is a per unit cost that does not change throughout the year. It is a predetermined rate that is set for a certain amount of time.
Fleet Cards
Fleet cards are usually associated with businesses and are used most commonly for auto expenses such as maintenance and gas.
Floor Limit
A floor limit is a certain amount that MasterCard and Visa has determined for which credit and debit transaction for single transactions must amount to at merchant outlets and branches.
Foreign Transaction Fee
A foreign transaction fee is a charge that many credit card companies, such as Visa and MasterCard, put on cards when purchases are made in countries that do not have a dollar currency or involve a foreign bank. The fee is usually a percentage of the purchase. It is also called a foreign exchange fee or currency conversion fee.
Fraud Alert
A fraud alert helps protect your credit card information. It is an alert on your credit card account or a credit bureau that is placed by the owner or the issuer of the card. If questionable actions are made regarding the account, it is flagged for a security check.
Fraudulent Transaction
A fraudulent transaction is one that is not made by the card holder. These transactions will be listed in different ways depending on the card company.
Fraudulent User
A fraudulent user is someone who uses credit card information from another person without authorization. They will use the information to purchase goods or services unbeknownst to the credit cardholder.
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Go-To Rate
A go-to rate is an interest rate put on credit cards after the beginning period, sometime known as the teaser period.
Grace Period
A grace period is the time, usually a month or more, before a debtor will have dues be paid with interest. A typical grace period is 31 days. According to Credit CARD Act of 2009, grace periods must be at least 21 days. It usually only applies to new purchases.
Gross Pay
A persons gross pay is the total allowances, commissions, overtime pay, bonuses, etc. before there are any deductions like taxes.
A guarantor is also known as co-signer would be someone who agrees to pay the loan of another person if he or she defaults on the obligation. It often times makes a lender more willing to approve a particular loan for a borrower of high-risk.
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Hard Inquiry
A hard inquiry is an indication on an individuals credit score that someone has asked for a copy. They are the result of an individual who applies for a loan or a mortgage. The hard inquiry has a minuscule negative impact on a persons credit score.
A hold occurs for example when a person checks into a hotel or rents a car and the issuer will charge an estimated amount until the final amount is determined. The final amount can be released within minutes or hours or even days.
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Identity Theft
Identity theft refers to fraud that involves the use of another persons personal information such as their name, Social Security number, credit card number etc. without the individuals knowledge.
Inactive Account
An inactive account is a bank account on which no transaction has occurred within a certain amount of time. If too long of a time has passed, in the case of credit card accounts, some card issuers can opt to close the account and take away charging privileges.
Inactivity Fee
An inactivity fee is imposed by certain banks on a credit card account that is not used for a certain amount of time. It is a way banks were able to increase their income in 2009 and 2010 but the Credit CARD Act has banned inactivity fees now.
Interchange Fee
an interchange fee is a term used to describe a fee paid by a business owners bank to a customers bank when merchants accept credit cards as a form of payment. The amount vary's, but it is usually around 2 percent of the total. The fee for purchases that are made in person are usually cheaper than those that are made online because the card is present and can be inspected.
Interest Rate
An interest rate is the price a borrower must pay for taking out a loan. An interest rate may be more complicated in the case of a credit card account due to the fact that lenders will add different types of interest rates. The beginning rate will be low, but new rates can be added with additional purchases.
Interest Rate Cap
An interest rate cap is a limit on how high an interest rate can be set for a customer. They can be obligatory in a credit card agreement or by law.
Introductory Period
An introductory period is a certain amount of time in which a certain percentage rate stays the same. Wants the amount of time is up, the rate will usually go up.
Introductory Rate
The introductory annual percentage rate is a temporary lower annual rate that is offered by credit card companies to interest a customer in applying for that particular card. The rate does not usually stay the same after the first year, but according to the Credit CARD Act of 2009 the Introductory Rate must last at a minimum of six months.
An issuer is a corporation that issues credit cards. A credit card issuer is not MasterCard or Visa, they are transaction processors.
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Joint Account
A joint account is a bank account that is owned by two or more people. Each person involved has withdraw and deposit privileges; also, if something goes wrong with the account such as fraud, defaults or overdrafts all parties will be held accountable.
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Keep and Pay
Keep and pay is a tactic that makes it possible for an individual who declares bankruptcy to maintain ownership of certain assets. You are able to avoid going to court, but since the debt is not on court documents, the individual is able to continue paying for the purchased item as agreed originally.
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Late Payment Fee
A late payment fee is a charge that is imposed on an individual for not paying his or her debt on time. It is possible that late payments can negatively affect your credit history.
Libor is also is short for the London Interbank Offered Rate. It is a daily reference rate that is based on the interest rates that banks use to lend money back and forth in the London wholesale market.
Line of Credit
A line of credit can take many forms: cash, credit, overdraft, term loan, discounting or purchase of commercial bills etc. It is a way for an individual to borrow and access money up to a certain limit and pay the money back and then be able to borrow again. A persons line of credit can be secured or unsecured and the interest rates are usually variable depending on the line.
Loyalty Programs
A loyalty program is a structured effort to encourage credit card customers to use specific cards. They are generally called rewards cards, discount cards, or point cards. For example, an airline company may offer airline miles that counts towards the cheaper purchase of a ticket by using their card.
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Magnetic Stipe
A magnetic strip connects you with the credit or debit card and your account number. The card will work when connected with a device that reads the information on the magnetic strip. It is separated into three parts: the first and second part are used to hold the information about your credit account and any other information is stored on the third part.
The margin is the difference between the variable interest rate and the prime interest rate. When an issuer sends out a monthly statement or opens an account for someone, that information for the variable interest rate must be shown.
Merchant Agreement
A merchant agreement is a written contract between a bank and a merchant that details the terms and conditions related to the use of bank cards and anything related to its activity.
Merchant Bank
A merchant bank is a credit card processing bank that has an agreement for a particular merchant to receive credit for deposits from bank card transactions minus a processing fee.
Minimum Finance Charge
A minimum finance charge is the smallest amount that must be paid on the balance of a credit card bill from the previous billing cycle. The charge is usually around $0.50 which can be higher than the finance charge. A minimum finance charge is different than a minimum payment.
Minimum Payment
A minimum payment is the smallest amount of money that a borrower must pay on a credit card statement for the month. Each credit card company can have different amount that will be due, but the "terms and conditions" document will outline the requirements for how much must be paid. Recently, the minimum payment has been raised from around the 2% it was because borrowers were long periods of time to pay off debts.
Money Market
The money market rate is used as an average rate for interest on bank funds. Two of the most common referred to are U.S. Treasury notes and LIBOR (London Interbank Offered Rate).
Monthly Periodic Rate
A monthly periodic rate is a rate and balance calculation method used for computing an individuals credit card bill. Once this is found, it will be multiplied the balance on the credit card to figure out the interest rate on a monthly basis.
Monthly Statement
A monthly statement is a statement that is mailed or found online by the bank for each account that shows all credit card transactions during a particular month. It shows any activity by the consumer such as payments, purchases or any charge put on the card.
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National Bank
A national bank is a commercial bank that is chartered by the federal government. It is supervised by the OCC (Office of the Comptroller of the Currency) and is required to be a part of the Federal deposit Insurance Corporation. Most credit card companies are part of a national bank.
National Issuers
When a bank issues credit cards all over the United States, it is called a national issuer. Unlike a state or regional issuer, a national issuer are lender friendly in all fifty states.
Negative Information
Negative Information is information that appears on a credit report that will negatively effect an individual when applying for a loan. The information can stay on record for as long as ten years depending on the type of information.
Net Pay
Net Pay is the money left over after the deductions from gross salary are made like taxes.
New Balance
The new balance is what is still owed on a credit card bill. It shows charges and payments from the last month and recent purchases along with other fees.
NFC stands for near field communication which means that there is a way for data technology to transfer from one wireless portal to another as long as they are a short distance away. For example your cell phone would be considered a NFC and would be able to communicate with some sort of remote computer to accept the message sent.
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Office of Comptroller of the Currency (OCC)
The Office of the Comptroller and the Currency (OCC) is a federal agency that is in charge of supervising of federal branches and agencies in the United States that issue credit cards.
Online Bill Presentment and Payment
By using online bill presentation and payment a customer is able to view and pay his or her bill online by transferring money from his/her checking account. There is no paper used when using online bill presentation and payment.
Open End
An open end loan is a loan where the total amount can be changed without re-negotiating the terms on the loan. The change can be good or bad depending on the risk there is in the eyes of the lender.
Opt Out
Opt out is an option that consumers have when the interest rates on the a debt owed increases or if there are changes in the terms predetermined. There must be forty five days advanced notice before changes are made so that the consumer is able to choose whether or not to opt out. A consumer must pay his or her debt within five years though if they use the opt out option.
When a consumer is over his/her limit it means that he/she has attempted to make a charge to an account that does not have sufficient funds. The card issuer might decline the transaction or their will be a fee for over-limit.
Over-Limit Fee
An over-limit fee is associated with a transaction that is made to an account with insufficient funds. The fee is usually very large but under the Credit CARD Act of 2009, an issuer must give the consumer the option of choosing between a declined purchase or a fee for allowing the transaction when setting up an account.
Overdraft Protection
When an individual attempts to withdraw more money than is available in a particular account (a checking account, savings account or any other line of credit), overdraft protection automatically transfers funds from one account into another to prevent overdraft fees. Overdraft protection, though, has fees and an individual can chose whether he or she wants this insurance.
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Payment Due Date
A payment due date is the particular date that a minimum payment is required to be paid by for an account every month.
Payment History
When an individual is applying for a loan with good rates, he/she wants a good payment history of on-time payments and good credit. A payment history shows an individuals credit rate over time.
Penalty Rate
A penalty rate is triggered by a consumer making late payments. It is usually several points higher than the current interest rate and it is charged by the credit card issuer.
Per Transaction Fees
A per transaction fee is associated with a merchants account. It means that every time a customer uses a credit/debit card for a transaction there is a fee to the merchant that is associated with that charge.
Periodic Statement
A periodic statement, also known as a billing statement or a monthly statement, is a record that is drawn up about once a month to show a consumer all of his/her transactions during that time. It includes payment, fees, charges, and purchases and is available by mail or electronically.
PIN (personal identification number)
A personal identification number is associated with a debit card that is like a password for a transaction to be accepted. It is a series of numbers that a card holder chooses when setting up his/her account. It also works to use a signature instead of putting in a pin number when making a transaction.
PIN cashing
PIN cashing is fraud that allows an individual to withdraw cash from a victims credit line by using stolen debit/credit card information.
Point of Sale Terminal
A point of sale terminal in terms of a credit card is the machine that the card can be swiped through and how the merchant is able to record receiving the payment. The transaction begins when the card is swiped and is completed when the payment is approved.
POS (Point of Sale)
The point of sale or the checkout is the place where the transaction occurs. There is an exchange between a merchant and a customer: goods or services are exchanged for payment.
Post Date
The Post Date is the day when a credit card company will become aware and place on their books a purchase made by a credit card owner.
Preapproval is something done by credit card issuers. They can see an individuals credit score and decide that he or she is eligible for a credit card by that particular company. An individual can not be solicited to until he or she is over the age of 21. It is also known as prescreening.
An individual who has been preapproved means that he or she has been screened for their credit score and deemed eligible for a credit card by a particular credit card company because his or her score is high enough. If an individual agrees the credit card issuers will decide on a annual rate percentage based on the individuals current credit score.
Prepaid Cards
A prepaid card is a card that works when purchasing items. There is a certain amount of money deposited onto the card at an earlier time and can be used until it reaches the amount deposited. They work like store-value cards.
Prime Borrower
A prime borrower is an individual with excellent credit scores and are acknowledged for paying off their debts on time. They are usually offered significantly lower interest rates due to their previous history.
Prime Credit
A prime credit means that an individual has a notable credit record and is acknowledged for paying debts on time. Individuals with prime credit are offered exceptional terms when being given credit. There is no defining score that separates individuals from having non-prime credit and usually varies from company to company.
Prime Rate
Also referred to as prime lending rate, this is the referenced interest rate used by banks as the annual percentage rate to quote loans against.
Prime Rate (or prime interest rate)
A prime rate is a rate that is 3% higher than the rate set by a bank. Most banks tend to have similar rates. Wall Street Journal is known for comparing the prime rates of different banks.
Purchase Rate
A purchase rate is a particular interest rate that an individual would be charged for purchasing something with his or her credit card. The rate is usually significantly lower than the rate that would be made for borrowing money because a credit card issuer or a bank would consider a daily purchase as something that is not as risky as lending money in advance.
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Qualifying Ratio
A qualifying ratio is a ratio that compares an individuals monthly obligations (other debts such as student loans, car payments etc) to the individuals monthly gross income. Depending on the particular lender, the ratio that is considered acceptable varies depending on the particular company.
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A reloadable card is a prepaid card that can have money added to it after the purchase date. There is usually a charge for issuing the card and then for adding money too it.
Remote Deposit Capture (RDC)
Depositing a check through a mobile device, like a smartphone or tablet. Pictures taken with the device are used to identify key information on checks, which is then verified by a bank or third party organization.
Returned Payment Fee
A returned payment fee is a fee associated with bill paid by a bounced check. The individual who writes the bounced check will have to pay a fee.
Revolving Balance
Revolving balance is debt that is still owed on a credit card after a billing cycle. The amount changes by cycle depending on how much an individual pays off or how much as added to the debt. Once a debt is paid off though the revolving balance is no longer there.
Reward Card
A reward card is credit card that offers benefits based upon the card's usage.The rewards vary but usually consist of airline tickets, discounts on future purchases, or cash refunds.
Risk-Based Pricing
Risk-based pricing is a form of interest rate that is decided by an individuals credit score and history of repayment. It is different for everyone.
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Secured Credit Cards
A secured credit card is a credit card that targets individuals with no credit history or poor credit history. They usually have high fees attached to them because individuals purchasing them do not have many other options. They also usually also require some sort of deposit before they are issued.
Security Code
A security code are digits that are associated with a credit card to verify the ownership of the card. The security code is usually three or four numbers long and can be on the front or the back of the card. Each credit card company usually has a different name for the security code such as a "card verification code"
Standard APR
A standard APR is something that begins after the introductory period has ended. The APR will come in many forms and each is associated with different actions made by a credit card owner such as a purchase or a balance transfer.
A statement is a record of every transaction that occurred during a billing cycle. It is prepared by a financial institution and includes anything from a withdrawal of money to interest earned.
Stored-Value Card
A stored-value card is a device that has a computer chip recorded with a certain amount of money. It is about the size of a credit card. If it is re-loadable then it is re-usable and money can be added to it from a teller machine.
Subprime Credit Card
A subprime credit card is a credit card that is geared towards individuals who do not have a prime credit history. They usually have high charges associated with them because the issuer is at a higher risk of an individual defaulting on payments.
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Tabling occurs when credit card companies advertise to students on college campuses to encourage them to sign up credit cards by offering gifts. Usually there will be tables set up by the card issuer in locations that are highly populated by college students.
Teaser Rate
A teaser rate is an interest rate put on credit cards at the beginning period. It lasts at least six months and then will usually rise significantly. It is sometimes known as the go-to rate.
Terms and Conditions
The terms and conditions of an agreement between a credit card issuer and a credit card company describe the rules and regulations that the credit card issuer goes by. Once the card is used for the first time, the terms and conditions of the credit card become legally binding.
Tiered Rewards
Tiered rewards are rewards that give a certain percentage of money back. As the amount of spending on the account increases, the percentage back increases as well. When someone spends $1000 they might get .25% back, and for each additional amount of money a higher they will receive a higher increment of a percentage back.
Total Finance Charge
The total finance charge is the total amount of money that a consumer pays that he/she borrows with a credit card. It would be the amount borrowed plus interest.
Truth in Lending Act
The Truth in Lending act promotes having credit card owners becoming more informed when deciding which card to use. It gives consumers more accurate information so they are able to compare different credit cards before choosing. Credit card issuers are required to give all information about the terms and conditions of the credit card so that consumers are not misinformed.
Truth in Savings Act
The Truth in Savings Act is a law that requires any bank or other type of association to put forth information about charges on deposit accounts that have to do with interest rates or any other charge. It commonly is referred to as the FDIC Improvement Act or Regulation DD.
Two-Cycle Billing
Two-cycle billing a way to calculate how much interest must be paid on balances left on credit cards from month to month. It considers the current balance on the credit card and the average daily balance from the previous billing period. It was banned by the Credit CARD Act of 2009. It is also known as double-cycle billing.
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Universal Default
Universal default makes it possible for credit card issuers to raise interest rates for a change in the a lenders profile. For example, if a credit card holder does not make his or her payments on time then a credit card issuer has the option to raise the interest rate.
Unsecured Credit Cards
An unsecured credit card does not require a security deposit to place a limit on the card. It is also not secured by collateral meaning it is not connected to the customers property making it impossible for the lender to seize it. The lender must come up with other means of receiving payment if a customer defaults on his or her payment.
User Authentication
User authentication is the process by which a system verifies the identity of an individual attempting to access it. It verifies the credit card holders identity.
Utilization Ratio
The utilization ratio is important in determining ones credit score. It will compare the amount of credit an individual is using with how much is available to the customer. It is better for an individual to have a low utilization ratio because that means that there is lower debt obligation and more available credit.
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Variable Interest Rate
A variable interest rate is an interest rate that fluctuates over time. These rates are pegged to prime rates. The prime rate is determined by the federal reserve and the variable interest rate will follow the prime rate when it fluctuates. Your variable interest rate will be the prime rate plus a certain amount.
Visa is a processor of transactions, either debit or credit, through its payments network. It has more than 13,300 institutions and about 520 million cards that it provides to customers.
Visa Issuer
A visa issuer is responsible for issuing a credit or debit card to an individual.
A void is a way to terminate a transaction and nullify it. It will no longer be settled and will be removed.
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Wall Street Journal Prime Rate
A common way to determine the prime rate. It is an index that is 3 percent higher than the federal funds rate. The Wall Street Journal takes a survey of thirty of the largest banks and assesses their prime rates. These rates are published in their print edition.
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X (Regulation X)
Regulation X a rule set by the Federal Reserve Board that puts a limit on the amount of credit that is allowed of financial institutions.
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Yield on Earning Assets
Yield on earning assets is a way to determine the solvency of a financial industry that is used by banking regulators. It is a percentage of average earning assets that comes from interest, dividend or income earned from loans or investments.
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Z Score
The z-score looks at how likely it is that a bank will become bankrupt. It is a formula that puts a value on five financial ratios. It was determined by professor Edward Altman at the New York University in 1968.
Zero Balance
Zero balance means that an individual has no debt on his or her credit card. By leaving a credit card at zero balance there is a possibility of loosing some credit history and could potentially hurt your credit score, but might be negligible if you continue making payments on time and using the credit card smartly.
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