CREDIT KNOWLEDGE A-Z
Account
Money deposited with a financial institution for investment and/or safekeeping purposes.
Affinity Card
A credit card affiliated with a third party that derives a value-added benefit from each transaction. For example, an alumni association or a museum may be awarded a percentage of all transactions charged to the affinity credit cards of the organization's members.
Annual Fee
The once-a-year cost of owning a credit card. Some credit card providers offer cards with no annual fee. The annual fee, with interest and other fees are part of the total cost of credit.
Annual Percentage Rate (APR)
The yearly interest charge applicable to outstanding credit card balances. It is one part of the total cost of credit.
Assets
Items of monetary value (i.e., house, land, car), owned by an individual or a company.
Automated Teller Machine (ATM)
A machine that processes current and savings account withdrawals and deposits, credit card cash advances and some types of payments (utility bills, for example). Accounts are accessed with an ATM, credit, or debit card.
Automatic Payments
Utility companies, loan payments, and other businesses may use an automatic payment system with bills paid through direct withdrawal from a bank account.
Average Daily Balance
Financial institutions measure and compute how much you owe on an average day of your billing cycle, and use the average amount to calculate how much interest you owe for the month. Different financial institutions use different ways to do this.
Balance
An outstanding amount of money. In banking, balance refers to the amount of money in a particular account. In credit, balance refers to the amount owed.
Balance Transfers
Allow you to take your balance from one credit card and pay off another, ideally with a lower cost.
Bankcard
A credit or debit card issued by a financial institution.
Bankruptcy
A legal declaration of insolvency. It can stop foreclosures, repossessions, garnishments and debt collection activities. While bankruptcy will not clean up a bad credit record, it will be part of the credit record for a number of years, depending on a country's bankruptcy laws. It usually does not wipe out child support, alimony, fines, taxes and some student loan obligations.
Bounced Check
A "bounced" check is one that a financial institution has refused to cash or pay. It might be because the account was closed, or there were insufficient funds to cover the amount of the check. Non-sufficient funds (NSF) are one reason for a bounced check.
Business Card
A credit card for small business owners. Business expenses are charged to this card to simplify bookkeeping and tax preparation.
Capital
A stock of accumulated wealth used or available for producing more wealth.
Cash
Money in the form of paper and coins. In banking, the act of paying a check - "to cash a check".
Charge Card
A plastic card that gives access to a usually unlimited line of credit. Charge cards must be paid in full at the end of each billing cycle.
Check
A written document instructing a financial institution to pay money from the writer's account.
Clear
A check "clears" when its amount is debited (subtracted) from the payer's account and credited (added) to the payee's account.
Chip Card/Smart Card
A card issued by a financial institution with an electronic chip embedded in it that can be loaded with multiple programs such as credit or debit card functions and frequent buyer or reward programs.
Co-Branded Card
A credit card linked with a third party - a retailer or an airline, for example, that offers rebates, discounts or other value-added benefits to the user, based on the dollar value of purchases charged within a certain time frame.
Collateral
Anything that a financial institution accepts as security against the debtor's not repaying a loan. If the debtor fails to repay the loan, the financial institution is allowed to take the collateral. Collateral is most commonly in the form of real estate (i.e. a home) or property, like a car.
Compound Interest
Interest calculated not only on the original principal but also on the interest already accrued.
Credit
In business, buying or borrowing on the promise to repay at a later date. In any credit arrangement, there is a creditor (a person, financial institution, store, or company to whom money is owed) and a debtor (the person who owes the money). In bookkeeping, a sum of money due to an individual or institution.
Credit Bureau
A credit reporting agency that checks credit information and keeps files on people who apply for and use credit.
Credit Card
A plastic card that gives access to a line of credit. Users are limited in how much they can charge, but they are not required to repay the full amount each month. Instead the balance "revolves" or accrues interest with only a minimum payment due.
Credit Limit
The maximum dollar amount that can be charged on a specific card account.
Credit Rating
A financial institution's evaluation of whether a person is suitable to receive credit. Credit ratings are usually based on an individual's character, capacity to repay and capital.
Credit Report
A report on a consumer's level of indebtedness and bill paying behavior. Information for the report is submitted to credit reporting agencies (or credit bureaus) from an individual's creditors. The agencies compile the report and release it to lenders and others with the consumer's permission.
Currency
Money - anything used as a common medium of exchange. In practice, currency means cash, particularly paper money. Bankers often use the phrase "coin and currency" to refer to cents and dollars.
Current or Checking Account
An account in which a consumer places cash or makes deposits, and for which the holder can write checks. Sometimes fees are charged if minimum requirements aren't met.
Cyberbanking
Banking through online Internet services. Financial institutions with website "cyber" branches allow customers to check balances, pay bills, transfer funds, compare savings plans, and apply for loans on the Internet.
Debit
A bookkeeping term for a sum of money owed by an individual or institution; a charge deducted from an account.
Debit Card
A card enhanced with ATM and point-of-sale features that can be used to purchase goods and services electronically. The card replaces cash or checks. Transactions are deducted from the cardholder's savings or current/checking account directly. Depending upon the type of card, a debit card may require a signature or entering a PIN number into special equipment.
Deposit Slip
An itemized slip showing the exact amount of paper money, coin, and checks being deposited to a particular account.
Depositor
An individual or company who puts money in an account.
Direct Deposit
Earnings (or government payments) automatically and electronically deposited into accounts, saving time, effort and money.
Electronic Cash
Companies are developing electronic replicas of all existing payment systems - cash, check, credit cards, debit cards and coins.
Finance Charge
This term covers the total cost of credit. It includes interest, and all other charges established by the issuing financial institution as a condition of credit. Charges may include: service fees, late fees, transaction fees and other miscellaneous charges.
Financial Institution
An establishment where you can deposit, borrow or exchange money.
Fixed Rates
An interest rate that doesn't change. The APR (annual percentage rate) is usually a fixed rate.
Grace Period
The period before interest begins to accrue on new purchases.
Identify Theft
A form of fraud in which consumers' financial information is illegally acquired for the purpose of making unauthorized purchases and transactions with their credit cards, or withdraw funds from their current or savings accounts.
Interest
The fee paid for the use of money. Interest may be paid, for example, by an individual to a financial institution for credit card use, or by a financial institution to an individual for holding a savings account. Interest is expressed in terms of annual percentage rate (APR).
Interest Computation Method
The way interest is calculated on a credit card balance. It can be charged by the day or month and includes interest on the unpaid balance.
Interest Rate
The percent, per unit of time, of the total sum borrowed that is charged by a bank or financial institution for the use of their money. Credit card interest may be computed by the year, by the month, or by the day.
Introductory Rates
Some credit cards may use the introductory rate as a special promotional offer. After a period of time, the rate usually returns to the standard rate.
Joint Account
A savings or current account established in the names of more than one person, for example, parent/child, wife/husband.
Liabilities
In financial terms, money owed to individuals, businesses or institutions.
Line of Credit
An authorized amount of credit given to an individual, business or institution.
Magnetic Stripe
The black strip on a credit card, debit or ATM card. It contains, in computer code, basic account information such as the holder's name and account number.
Minimum Payment
The minimum dollar amount that must be paid each month, usually 2 to 3 percent of the amount owed, based on average daily balance.
Money
Anything generally recognized as a medium of exchange.
Mortgage
A long-term loan obtained by individuals to buy a home that legally transfers ownership from the debtor to the creditor until the debt is paid.
Overdraft
A check written for more money than is currently in the account. If the financial institution refuses to cash the check, it is said to have "bounced".
Passbook
A booklet given by the financial institution to the depositor to record deposits, withdrawals, and interest earned on a savings account.
Payee
An individual or company to whom a check is written; one who receives money as payment.
Payer
An individual or company who writes a check; one who gives money as payment.
Payment Schedule
Credit cards often have a choice between partial payment with a minimum due, or full payment, where the full balance is expected.
Periodic Rate
A variable interest rate that may increase or decrease during each calendar quarter and affect both the finance charges and the minimum payment due on a credit card.
Point-of-Sale Transactions
Acceptance of ATM/debit or credit cards at retail stores and restaurants for payment of goods and services.
Prepaid Card
A card that stores a dollar value. The card can be used for purchases or make cash withdrawals at ATMs up to the dollar amount stored before it is disposed or reloaded.
Principal
The original amount of money borrowed, deposited, or invested before interest accrues.
Purchasing Card
A credit card used by companies to make medium to low value purchases. It eliminates the need for purchase orders. Orders are placed directly with a participating supplier and charged to the purchasing card.
Refinance
To revise a loan agreement to make the terms of payment more suitable to a borrower's present income and ability to repay. Refinancing usually provides a lower interest rate and lower monthly payments.
Rewards
Some credit cards offer air miles, free petrol, or other rewards as they are used. They are also called loyalty programs.
Savings Account
An account that accrues interest in exchange for its use of the money on deposit. The depositor is usually allowed an unlimited number of deposits and withdrawals.
Service Charge
A monthly fee a financial institution charges for handling a current or checking account.
Stop Payment
A request made to a financial institution not to pay a specific check. If requested soon enough, the check will not be debited from the payer's account. Normally there is a charge for this service.
Terms
The period of time and the interest rate arranged between creditor and debtor to repay a loan.
Variable Rate
An interest rate that can change periodically.
Withdrawal
An amount of money taken out of an account.
Money deposited with a financial institution for investment and/or safekeeping purposes.
Affinity Card
A credit card affiliated with a third party that derives a value-added benefit from each transaction. For example, an alumni association or a museum may be awarded a percentage of all transactions charged to the affinity credit cards of the organization's members.
Annual Fee
The once-a-year cost of owning a credit card. Some credit card providers offer cards with no annual fee. The annual fee, with interest and other fees are part of the total cost of credit.
Annual Percentage Rate (APR)
The yearly interest charge applicable to outstanding credit card balances. It is one part of the total cost of credit.
Assets
Items of monetary value (i.e., house, land, car), owned by an individual or a company.
Automated Teller Machine (ATM)
A machine that processes current and savings account withdrawals and deposits, credit card cash advances and some types of payments (utility bills, for example). Accounts are accessed with an ATM, credit, or debit card.
Automatic Payments
Utility companies, loan payments, and other businesses may use an automatic payment system with bills paid through direct withdrawal from a bank account.
Average Daily Balance
Financial institutions measure and compute how much you owe on an average day of your billing cycle, and use the average amount to calculate how much interest you owe for the month. Different financial institutions use different ways to do this.
Balance
An outstanding amount of money. In banking, balance refers to the amount of money in a particular account. In credit, balance refers to the amount owed.
Balance Transfers
Allow you to take your balance from one credit card and pay off another, ideally with a lower cost.
Bankcard
A credit or debit card issued by a financial institution.
Bankruptcy
A legal declaration of insolvency. It can stop foreclosures, repossessions, garnishments and debt collection activities. While bankruptcy will not clean up a bad credit record, it will be part of the credit record for a number of years, depending on a country's bankruptcy laws. It usually does not wipe out child support, alimony, fines, taxes and some student loan obligations.
Bounced Check
A "bounced" check is one that a financial institution has refused to cash or pay. It might be because the account was closed, or there were insufficient funds to cover the amount of the check. Non-sufficient funds (NSF) are one reason for a bounced check.
Business Card
A credit card for small business owners. Business expenses are charged to this card to simplify bookkeeping and tax preparation.
Capital
A stock of accumulated wealth used or available for producing more wealth.
Cash
Money in the form of paper and coins. In banking, the act of paying a check - "to cash a check".
Charge Card
A plastic card that gives access to a usually unlimited line of credit. Charge cards must be paid in full at the end of each billing cycle.
Check
A written document instructing a financial institution to pay money from the writer's account.
Clear
A check "clears" when its amount is debited (subtracted) from the payer's account and credited (added) to the payee's account.
Chip Card/Smart Card
A card issued by a financial institution with an electronic chip embedded in it that can be loaded with multiple programs such as credit or debit card functions and frequent buyer or reward programs.
Co-Branded Card
A credit card linked with a third party - a retailer or an airline, for example, that offers rebates, discounts or other value-added benefits to the user, based on the dollar value of purchases charged within a certain time frame.
Collateral
Anything that a financial institution accepts as security against the debtor's not repaying a loan. If the debtor fails to repay the loan, the financial institution is allowed to take the collateral. Collateral is most commonly in the form of real estate (i.e. a home) or property, like a car.
Compound Interest
Interest calculated not only on the original principal but also on the interest already accrued.
Credit
In business, buying or borrowing on the promise to repay at a later date. In any credit arrangement, there is a creditor (a person, financial institution, store, or company to whom money is owed) and a debtor (the person who owes the money). In bookkeeping, a sum of money due to an individual or institution.
Credit Bureau
A credit reporting agency that checks credit information and keeps files on people who apply for and use credit.
Credit Card
A plastic card that gives access to a line of credit. Users are limited in how much they can charge, but they are not required to repay the full amount each month. Instead the balance "revolves" or accrues interest with only a minimum payment due.
Credit Limit
The maximum dollar amount that can be charged on a specific card account.
Credit Rating
A financial institution's evaluation of whether a person is suitable to receive credit. Credit ratings are usually based on an individual's character, capacity to repay and capital.
Credit Report
A report on a consumer's level of indebtedness and bill paying behavior. Information for the report is submitted to credit reporting agencies (or credit bureaus) from an individual's creditors. The agencies compile the report and release it to lenders and others with the consumer's permission.
Currency
Money - anything used as a common medium of exchange. In practice, currency means cash, particularly paper money. Bankers often use the phrase "coin and currency" to refer to cents and dollars.
Current or Checking Account
An account in which a consumer places cash or makes deposits, and for which the holder can write checks. Sometimes fees are charged if minimum requirements aren't met.
Cyberbanking
Banking through online Internet services. Financial institutions with website "cyber" branches allow customers to check balances, pay bills, transfer funds, compare savings plans, and apply for loans on the Internet.
Debit
A bookkeeping term for a sum of money owed by an individual or institution; a charge deducted from an account.
Debit Card
A card enhanced with ATM and point-of-sale features that can be used to purchase goods and services electronically. The card replaces cash or checks. Transactions are deducted from the cardholder's savings or current/checking account directly. Depending upon the type of card, a debit card may require a signature or entering a PIN number into special equipment.
Deposit Slip
An itemized slip showing the exact amount of paper money, coin, and checks being deposited to a particular account.
Depositor
An individual or company who puts money in an account.
Direct Deposit
Earnings (or government payments) automatically and electronically deposited into accounts, saving time, effort and money.
Electronic Cash
Companies are developing electronic replicas of all existing payment systems - cash, check, credit cards, debit cards and coins.
Finance Charge
This term covers the total cost of credit. It includes interest, and all other charges established by the issuing financial institution as a condition of credit. Charges may include: service fees, late fees, transaction fees and other miscellaneous charges.
Financial Institution
An establishment where you can deposit, borrow or exchange money.
Fixed Rates
An interest rate that doesn't change. The APR (annual percentage rate) is usually a fixed rate.
Grace Period
The period before interest begins to accrue on new purchases.
Identify Theft
A form of fraud in which consumers' financial information is illegally acquired for the purpose of making unauthorized purchases and transactions with their credit cards, or withdraw funds from their current or savings accounts.
Interest
The fee paid for the use of money. Interest may be paid, for example, by an individual to a financial institution for credit card use, or by a financial institution to an individual for holding a savings account. Interest is expressed in terms of annual percentage rate (APR).
Interest Computation Method
The way interest is calculated on a credit card balance. It can be charged by the day or month and includes interest on the unpaid balance.
Interest Rate
The percent, per unit of time, of the total sum borrowed that is charged by a bank or financial institution for the use of their money. Credit card interest may be computed by the year, by the month, or by the day.
Introductory Rates
Some credit cards may use the introductory rate as a special promotional offer. After a period of time, the rate usually returns to the standard rate.
Joint Account
A savings or current account established in the names of more than one person, for example, parent/child, wife/husband.
Liabilities
In financial terms, money owed to individuals, businesses or institutions.
Line of Credit
An authorized amount of credit given to an individual, business or institution.
Magnetic Stripe
The black strip on a credit card, debit or ATM card. It contains, in computer code, basic account information such as the holder's name and account number.
Minimum Payment
The minimum dollar amount that must be paid each month, usually 2 to 3 percent of the amount owed, based on average daily balance.
Money
Anything generally recognized as a medium of exchange.
Mortgage
A long-term loan obtained by individuals to buy a home that legally transfers ownership from the debtor to the creditor until the debt is paid.
Overdraft
A check written for more money than is currently in the account. If the financial institution refuses to cash the check, it is said to have "bounced".
Passbook
A booklet given by the financial institution to the depositor to record deposits, withdrawals, and interest earned on a savings account.
Payee
An individual or company to whom a check is written; one who receives money as payment.
Payer
An individual or company who writes a check; one who gives money as payment.
Payment Schedule
Credit cards often have a choice between partial payment with a minimum due, or full payment, where the full balance is expected.
Periodic Rate
A variable interest rate that may increase or decrease during each calendar quarter and affect both the finance charges and the minimum payment due on a credit card.
Point-of-Sale Transactions
Acceptance of ATM/debit or credit cards at retail stores and restaurants for payment of goods and services.
Prepaid Card
A card that stores a dollar value. The card can be used for purchases or make cash withdrawals at ATMs up to the dollar amount stored before it is disposed or reloaded.
Principal
The original amount of money borrowed, deposited, or invested before interest accrues.
Purchasing Card
A credit card used by companies to make medium to low value purchases. It eliminates the need for purchase orders. Orders are placed directly with a participating supplier and charged to the purchasing card.
Refinance
To revise a loan agreement to make the terms of payment more suitable to a borrower's present income and ability to repay. Refinancing usually provides a lower interest rate and lower monthly payments.
Rewards
Some credit cards offer air miles, free petrol, or other rewards as they are used. They are also called loyalty programs.
Savings Account
An account that accrues interest in exchange for its use of the money on deposit. The depositor is usually allowed an unlimited number of deposits and withdrawals.
Service Charge
A monthly fee a financial institution charges for handling a current or checking account.
Stop Payment
A request made to a financial institution not to pay a specific check. If requested soon enough, the check will not be debited from the payer's account. Normally there is a charge for this service.
Terms
The period of time and the interest rate arranged between creditor and debtor to repay a loan.
Variable Rate
An interest rate that can change periodically.
Withdrawal
An amount of money taken out of an account.