Annual Percentage Rate (APR)
The yearly rate of interest on a credit card account, expressed as a percentage.
A card used in an automated teller machine (ATM) to access a credit or a debit account to complete banking inquiries and fund transfers between accounts.
Average Daily Balance
The balance subject to interest charge that calculates the balance for each day during
the statement cycle. The average daily balance is determined by adding up the daily balances, then dividing them by the number of days in the cycle.
The status of being legally declared unable to pay your debts as they become due. Federal bankruptcy laws have been enacted that allow a person or organization to liquidate their assets to pay a reduced amount to their creditors or that allow the rehabilitation of the debtor by requiring creditors to accept reduced payments from future earnings of the debtor. A declaration of bankruptcy will remain on a person's credit report from 7 to 10 years and, in some cases, indefinitely. Declaring bankruptcy is generally considered a last resort.
Business Card (Business Credit Card)
A bookkeeping and tax preparation tool for many businesses, these credit cards are generally issued to corporate executives, business owners and designated employees. They make it easy to keep business expenses separate from personal charges.
There are various types of Chip Cards, sometimes called Smart Cards. Electronic chips allow these cards to function in different ways: as credit cards, debit cards, frequent buyer or rewards program cards, ID cards, or any combination. Many college ID cards are chip cards. These may or may not be credit cards.
A credit card sponsored by both the issuing bank and a retail organization, such as a department store or an airline. Cardholders may benefit through account enhancements that provide such benefits as discounts or free merchandise from the sponsoring merchant based on account usage.
Consumer Credit Counseling Service (CCCS)
This is a nonprofit organization that has helped thousands of people get out of debt. CCCS counselors can advise you on how to develop a budget you can live with and can be invaluable in helping you negotiate repayment plans with your creditors. This service is confidential. To reach the CCCS, call 1-800-388-2227.
Credit Card Insurance
Protects you if you are unable to pay your credit card bills because of illness, unemployment, or other severe conditions. Under these circumstances, the insurance provider will pay your minimum payments.
The most you can charge on your credit card account. When you receive a new credit card, you're usually issued a set credit line. Under some circumstances, your card issuer may increase or decrease it.
The record of your credit history. It shows whether you pay your bills on time, how much debt you have, and the like. Your report is compiled by credit reporting agencies and released to lenders and others. You may order a free credit report every year from the three major credit bureaus. See "Credit Reporting Agencies".
Credit Reporting Agencies
Credit reporting agencies collect and report vital facts about your financial habits, for instance, whether or not you pay your bills on time. These facts are then compiled into a "credit report," which can be accessed by potential creditors, employers, and the like. The three major credit reporting agencies are Equifax, Experian and TransUnion. You can contact them at the addresses below.
P.O. Box 740241
Atlanta, GA 30374
P.O. Box 9595
Allen, TX 75013-2140
P.O. Box 1000
Chester, PA 19022
A credit card endorsed by groups, such as colleges, sports teams, professional organizations, or special interest groups, and offered to their alumni, fans, or members. Typically, use of the credit card gives financial benefit to the endorsing organization.
Equal Credit Opportunity Act (Implemented by Federal Reserve Regulation B)
This federal law protects your rights against being denied credit because of sex, race, color, age, national origin, or religion. It also guarantees your right to have credit in your given name or your married name, the right to know why your credit application is rejected, and the right to have someone other than your husband or wife co-sign for you.
Fair Credit Billing Act
This federal act protects many important credit rights including your rights to dispute billing errors, unauthorized use of your account, and charges for unsatisfactory goods and services.
If you have a credit card, the period of time the issuer doesn't charge interest on purchases. Be sure to read the fine print; Some credit card issuers give a grace period only if the account is paid up and doesn't have a balance carried over from the previous month.
A rate of interest charged for the use of a credit card, loan or line of credit, expressed as a percentage of the total amount loaned. Different types of loans charge different rates of interest.
The sum of interest on your credit card account, and it is broken down by transaction type: purchases, cash advances, and balance transfers.
A temporary, usually low, interest rate (expressed as an annual percentage rate) offered by providers to "introduce" you to their services. It will usually expire after a certain amount of time and may also be terminated based on your behavior, such as if you make late payments. Be sure to check the details of the offer for any limitations on an introductory APR.
LIBOR (London interbank offered rates)
Five major London banks determine these fixed rates daily for specific maturities. What does this mean to you? LIBOR may be used by some banks instead of the Prime Rate to set APRs.
Unlike a "variable APR," this type of APR does not automatically fluctuate based on changes in an index such as Prime Rate or LIBOR. A "fixed APR" does not mean that the rate is guaranteed not to change, though. Refer to your account terms for information on your issuer's ability to change the APR on your account.
How much you owed your card issuer at the end of your last billing period.
Unlike interest or fees, the principal reflects the actual dollar amount of the purchases you made or the balance that remains on your loan or credit card account.
A real convenience for businesses, this card eliminates the need for time-consuming purchase orders. A company simply places orders directly with suppliers and charges them to the card, usually for purchases of $5,000 or less.
A great "first credit card" or way to reestablish your credit rating, this kind of card is "secured" by money you deposit in a designated savings account. For instance, if you deposit $500, your credit card limit generally will be for that amount. If for some reason you cannot pay your credit card bills, your credit card issuer will be paid from the savings account.
See Chip Card.
Fees charged when you make certain types of transactions. Transaction fees are typically assessed on balance transfers, cash advances and cash-like transactions, such as money orders, wire transfers, and casino gaming chips.
Truth in Lending Act (Implemented by Federal Reserve Regulation Z)
This federal law protects you by making sure lenders tell you about the costs, terms, and conditions at the time they offer you a loan or credit card.