Annual percentage rate (APR)
The APR is a measure of the cost of credit, expressed as a yearly interest rate. Usually, the lower the APR, the better for you. Be sure to check the fine print to see if your offer has a time limit. Your APR could be much higher after the initial limited offer.
Many credit card issuers charge an annual fee for giving you credit, typically $15 to $60.
The amount owed on a loan or credit card or the amount in a savings or investment account.
Property that is offered to secure a loan or other credit and that becomes subject to seizure on default.
Interest that is calculated on the original principal plus all interest accrued to that point in time. Since interest is paid on interest as well as the amount borrowed, the effective interest rate is greater than the nominal interest rate. The compound interest rate method is often used by banks and savings institutions in determining interest they pay on savings deposits "loaned" to the institutions by the depositors.
Consumer Credit Protection Act
In 1968 Congress passed the first in a series of laws, under the Consumer Credit Protection Act, designed to shield consumers from unfair lending practices. Understanding these laws can help you avoid unnecessary worries and may even save you money.
A term referring to a person, other than the principal borrower, who signs for a loan. The cosigner(s) assumes equal liability for the loan.
The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.
A business organization that puts together information for your credit file, keeps it up to date, and makes it available for a fee to lenders, insurance companies, and potential employers.
Any card, plate or coupon book that may be used repeatedly to borrow money or buy goods and services on credit.
A record of how a person has borrowed and repaid debt.
An estimate of the amount of credit that can be extended to an individual or business without undue risk. (See also Credit scoring system)
A loan and bill payment history, kept by a credit bureau and used by financial institutions and other potential creditors to determine the likelihood that a future debt will be repaid.
Credit scoring system
A statistical system used to determine whether to grant credit by assigning numerical scores to various characteristics related to creditworthiness.
A person, financial institution or other business that lends money.
A creditor's measure of a consumer's past and future ability and willingness to repay debts.
Customer service is something most people donít consider, or appreciate, until thereís a problem. Look for a 24-hour toll-free telephone number.
In relation to credit cards, a grace period is the number of days you have before a credit card company starts to charge you interest on new credit purchases. It is the time between the closing date of the billing cycle and the due date, or date by which you have to pay the balance in full and avoid finance charges. Most grace periods are 20 to 25 days.
Money owed; also known as liability.
Equal Credit Opportunity Act
Enacted in 1974, the Equal Credit Opportunity Act, or ECOA, seeks to ensure that non-credit-related factors, such as a person's race, national origin, or sex, do not enter into a decision to deny a person's request for credit.
The total dollar amount paid to get credit.
A company that makes loans to individuals.
The fee a lender charges to originate a loan. The fee is based on a percentage of the loan amount; one point is equivalent to one percent.
A fee for the use of money over time. It is an expense to the borrower and revenue to the lender. Also money earned on a savings account.
The percentage charged for a loan, usually a percentage of the amount lent. Also, the percentage paid on a savings account.
A sum of money lent at interest.
Transaction fees and other charges
Most creditors charge a fee if you donít make a payment on time. Other common credit card fees include those for cash advances and going beyond the credit limit. Some credit cards charge a flat fee every month, whether you use your card or not.