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Glossary Of Credit Terms
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Annual Fee: A yearly fee charged by some credit card issuers to cardholders who agree to use the card in accordance with the card's rules. The card issuer must notify cardholders if the card carries an annual fee.
Annual Percentage Rate (APR): Also known as the interest rate. The yearly rate or percentage that one pays on credit balances in the form of interest.
Automated Teller Machine (ATM): Allows customers to perform banking transactions anywhere and at anytime. By using a debit or ATM card at an ATM, individuals can withdraw cash from checking or savings accounts, make a deposit, or transfer money from one account to another. You can also get cash advances using a credit card at an ATM. Individuals should also be aware that card issuers and ATM owners charge transaction fees – ranging from $0.50 cents to $3 per transaction – for using another bank's ATM.
Cash Advance: A borrower may obtain cash "on the spot" by using their credit card at a bank or an ATM. The amount of the cash advance is deducted from your available credit line. A fee is often charged when obtaining cash advances. In addition, the interest rate is usually higher than on purchases and there is typically no grace period.
Cosigner: A cosigner agrees to the responsibilities of a credit application with you, which basically means that they take on liability for your debts. A family member or friend who has an established credit history may be eligible to be cosigners.
Credit: An arrangement between a lender and a borrower whereby a lender lends money to a borrower, and the borrower agrees to pay it back.
Credit Card: A type of payment card that involves a revolving line of credit that is issued to the cardholder. They provide flexibility, allowing you to pay your whole bill at once or over time in increments. If you do not choose to pay your balance in full each month, you will be required to make at least the minimum payment and to pay finance charges on the remaining balance. Credit cards are issued by banks, credit unions, and some retailers like department stores and gasoline companies, among others.
Credit Line: Also referred to as your credit limit. This is the maximum amount you can borrow using your credit card.
Debit Cards/ATM Cards: Debit and ATM cards are types of payment cards that provide a convenient and secure alternative to cash and checks. They allow you to make a purchase and to access your bank accounts anywhere through the use of an ATM machine.
Grace Period: A period of time when you're not charged interest for purchases you've made. For example, if the billing date on your credit card bill is May 1, you may have until May 25 to pay your balance in full. If you do, you will not be charged interest. If your payment arrives after May 25 – or if you don't pay the entire balance – you may be charged interest from the date of purchase as posted. Some accounts have no grace period, which means interest is charged on purchases from the date they are posted.
Interest Charges/Finance Charges: The price paid to a lender for the use of borrowed money. Interest is charged as a percentage of your outstanding balance. This percentage, or interest rate, can vary over time from card to card.
Issuer: Institutions that provide a credit line to a consumer through a payment card are called issuers. Issuers can include banks, credit unions or savings and loan associations, and retailers such as department stores or gasoline companies.
Outstanding Balance: The total amount of money that is owed to the financial lender after a payment is made. For example if you have a $500 credit card balance, and you pay $100 when you receive your statement, your outstanding balance is $400.
Over the Limit: When a borrower has accessed an amount of money larger than what is available in their credit line. Depending on the credit issuer, this may be permitted, but the borrower will usually be charged an "Over the Limit" fee.
Overdrawing an Account: Withdrawing more money from a checking or savings account than is available. This can result in a fee being charged or the withdrawal or check being declined.
Payment Cards: The most familiar types of payment cards are credit, charge and debit cards. These financial tools allow consumers to make purchases online, over the phone or in person at merchants across the world.
Secured Cards: Secured cards are a great "first step" for those with little or no credit history. This type of payment card requires that a security deposit be made in order to establish a credit line. Your credit line will typically be equal to the amount of your deposit.
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