A company that collects individual consumer credit ...



Must-Know Credit TermsInformation provided by and Sears Credit CardAnnual Fee A bank charge imposed each year for use of a credit card. It may also be called a membership or participation fee. It can range from $15 to $300, and usually gets billed directly to the customer's monthly statement. Many credit cards come without an annual fee.Annual Percentage Rate (APR):A yearly interest rate that includes fees and costs paid to acquire the loan. Lenders are required by law to disclose the APR. The rate is calculated in a standard way, taking the periodic rate and multiplying it by the number of billing periods in a year.Asset:Personal possessions of value, including cash, real estate and investments.ATM:Automated Teller MachineATM Card:A Card connected to your personal bank account and issued by your bank. These cards can be used to get cash from ATMs and also to make purchases in select locations. However, acceptance is minimal in comparison to a debit card.Available Credit:The unused portion of your credit line.Average Daily Balance:This is the method by which most credit cards calculate your payment due. An average daily balance is determined by adding each day's balance and then dividing that total by the number of days in a billing cycle. The average daily balance is then multiplied by a card's monthly periodic rate, which is calculated by dividing the annual percentage rate by 12. A card with an annual rate of 18 percent would have a monthly periodic rate of 1.5 percent. If that card had a $500 average daily balance it would yield a monthly finance charge of $7.50. Balance:The total of unpaid balance from the previous month, new purchases, cash advances, and any other charges such as an annual fee, late fees or finance charges. This is not to be confused with the minimum payment, which is the amount due each month.Balance Transfer:The process of moving an unpaid credit card debt from one issuer to another.Bankruptcy:A legal proceeding that protects a debtor from legal action by some creditors. There are two basic ways of filing for personal bankruptcy. A Chapter 7 bankruptcy declaration gets rid of all debts (except some taxes and maybe alimony payments); Chapter 13 allows a borrower with a steady income to pay off bills over a 36- to 60-month period.Billing Cycle:The number of days between your last statement date and your current statement date (usually around 30 days). Billing Error Notice:A written notice to your card issuer to correct an error in billing, which must be received no later than 60 days after receipt of the first statement on which the error appeared. The issuer has 90 days to resolve the dispute. You are not required to pay the amount in question while it is investigated, but your obligation on non-disputed charges is not affected when you submit a billing error notice.Billing Statement:A monthly bill which summarizes your account activity for the month, including the outstanding balance, purchases, payments, credits, finance charges and more.Cardholder Agreement:The written statement that gives the terms and conditions of a credit card account. The cardholder agreement is required by Federal Reserve regulations. It must include the Annual Percentage Rate, the monthly minimum payment formula, annual fee if applicable, and the cardholder's rights in billing disputes. Changes in the cardholder agreement may be made, with written advance notice, at any time by the issuer. Rules for imposing changes vary from state to state, but the rules that apply are those of the home state of the issuing bank, not the home state of the cardholder.Cash AdvanceA cash loan drawn from your credit card account. Finance charges may accrue from the day you take it until it is paid off or at a later time depending on the terms of your account. Additional transaction fees may also be charged on the total withdrawal amount. You can receive a cash advance through an ATM, a bank teller or through the use of a convenience check.Cash Advance fee:A charge by the bank for using credit cards to obtain cash. This fee can be stated in terms of a flat per-transaction fee or a percentage of the amount of the cash advance. For example, the fee may be expressed as follows: "2%/$10". This means that the cash advance fee will be the greater of 2 percent of the cash advance amount or $10. The banks may limit the amount that can be charged to a specific dollar amount. Depending on the bank issuing the card, the cash advance fee may be deducted directly from the cash advance at the time the money is received or it may be posted to your bill as of the day you received the advance. The cost of a cash advance is also higher because there generally is no grace period. Interest accrues from the moment the money is withdrawn, often at a higher interest rate than purchases.Charge Card:A card that charges no interest but requires that the entire balance is paid in full before the end of the billing period (i.e. a Diners Club? card or AMEX).Collateral:Your personal assets that are used to guarantee repayment to a lender. If payments are not made according to your agreement the lender can take possession of these assets. Collateral is not required for unsecured credit card accounts. (See Secured Card)Consolidation Loan:A loan that is used to pay off your credit balances, so that you can make a single monthly payment. You can consolidate by transferring balances to one low-interest card, take out a home equity loan or obtain a consolidation loan.Convenience Checks:Checks sent to you by your credit card company which can be written, and drawn off of your credit card account and used just like your personal bank checks. Check charges appear on your credit account like a purchase, but unlike a purchase, may incur additional cash advance fees. Occasionally, checks offer a special rate not available when using the card.Co-Signer:A person other than the primary applicant, who assumes responsibility for repaying debt if the applicant is unable to pay.Credit Bureau:A company that collects individual consumer credit information from banks, lenders and credit issuers, then provides that information to others looking to verify credit history and assess credit worthiness. For more information contact one of the major bureaus:Equifax Information Services, LLCP.O Box 740241Atlanta, Georgia 30374Telephone: (800) 685-1111TDD: (800) 255-0056Web Address: . Box 4500Allen, TX 75013Telephone: (888) EXPERIAN or (888) 397-3742TDD: (800) 972-0322Web Address: Baldwin PlaceP.O. Box 1000Chester, PA 19022 Telephone: (800) 888-4213Deaf or Hearing Impaired: (877) 553-7803Web Address: amount of money that a bank or credit issuer will allow you to borrow in the form of purchases and cash advances, as long as you pay back the minimum amount due on the account each month.Credit Card:A card that allows you to access and charge against a line of credit, to be billed at a later date. Minimum monthly payments must be made and the balance can be rolled over from month to month.Credit Criteria:Factors considered by lenders to determine how much credit to extend, including income, number of accounts and amount of debt from other sources and credit history. A lender can approve or deny credit based on any credit-related information, however, the Equal Credit Opportunity Act prohibits discrimination on the basis of race, sex and other factors. Credit History:Your credit history is a record of your current and past debt. It tracks your payment behavior, number of accounts, amount owed, open credit available and more. Lenders and other companies will reference your credit history to determine whether you are a responsible borrower or customer. Missed or late payments will appear on your credit history for up to seven years. A personal bankruptcy filing shows on your history for as long as ten years.Credit Limit:The maximum amount the card allows you to borrow.Credit Line:When you are approved for credit, the issuer determines the maximum balance you could pay—this becomes your credit limit. Standards for setting credit limits vary by company. Some of the factors that may be considered are:Monthly income Open credit lines and balances (other cards, car loans, student loans, etc.) Home ownership and length of time at your current address Number of times you’ve applied for credit Amount of credit you would use You can often request a higher credit limit when necessary. Your credit history will be reviewed and a new limit considered. Maintaining a clean credit history will help increase your credit line.Credit Report:A credit report is a compilation of the credit history of an individual or business. It is compiled by one or more of the credit bureaus and contains the detailed history of borrowing, payment behavior and credit inquiries. Credit reports are viewed by lenders in deciding whether to extend credit and on what terms. Credit reports are distilled using complex formulas, into three-digit numbers called credit scores.Daily Periodic Rate:Your yearly interest rate (APR) is divided by 365 days, then used to calculate interest charges on a daily basis. Debit Card:A card that is tied to your bank account and functions like a personal check. Money is deducted directly from your checking account balance. Purchases/withdrawals that exceed the amount of money in your account will not be processed.Debit cards feature major credit card companies’ (i.e. Visa? or MasterCard International?) acceptance mark and can be used everywhere you see their logo.Debt:The total amount of money you owe to banks or credit issuers.Debt Ratio:The total amount you owe in relation to how much you earn. Essentially, it is the percentage of your income that is used to pay monthly debts. Debt Ratio is a quick reference of your overall financial well being.To calculate your debt ratio, divide your monthly net income (after taxes) by the total of your monthly debt payments (including rent), then multiply by 100. A good ratio is under 20%.Default:Failure to make payments or otherwise maintain your account according to the terms defined in your account agreement.Deferred Payment:Payments that are not due until a designated future date or extended over a period of time. Interest may accrue during the deferred period of time.Delinquency:When payments are not paid timely and according to the terms of the agreement.Disclosure Statement:A statement that defines the cost of a credit line, including estimated interest costs and fees. See your Cardholder Agreement for disclosure on your account.Due Date:The date by which your monthly payment must be received to be considered timely and to avoid late payments, fees and interest charges.Equal Credit Opportunity Act:A federal law that protects applicants against discrimination, allowing everyone equal opportunity to obtain credit.Fees:In addition to finance charges, annual fees and late fees, companies may charge fees for exceeding your limit, returned checks, stop-payment requests and such. If you have questions about other fees, your card issuer can answer them.Finance charge:The charge for using a credit card, comprised of interest costs and other fees.Floor:The minimum rate possible on a variable-rate loan or line of credit, after any initial introductory rate period. For example, on a credit card with the Prime rate as its index, no matter how low the Prime rate drops, the rate on the line may never decrease below the stated rate floor.Finance charges can be calculated in different ways. See your card terms and conditions for the method that applies to your account.Average daily balance: totals your balance each day during the billing period, then adds these daily balances together and divides by the number of days in the period. Adjusted balance: subtracts payments made during the billing period from your balance at the beginning of the period. You pay less in finance charges because your balance is lower. Previous balance: applies the monthly finance charge to your beginning balance for the billing period. Purchases and payments during the month do not affect the finance charges. Ending balance: uses your ending balance for the billing period. Any purchases and payments made during the billing period affect the charges. Finance Company:A business that offers loans to consumers who may not qualify for credit with other lenders, typically at a higher interest rate.Financial Well Being:An overview of your financial history and how well you manage your money when considering the amount of debt you owe, payment history, etc.General Purpose Card:A general purpose card is a line of credit that offers wider utility and worldwide acceptance. These cards can be used for just about any product and service around the world as well as cash access at Automated Teller Machines (ATMs).Grace period:If the credit card user does not carry a balance, the grace period is the interest-free time a lender allows between the transaction date and the billing date. The standard grace period is usually between 20 and 30 days. If there is no grace period, finance charges will accrue the moment a purchase is made with the credit card. People who carry a balance on their credit cards have no grace period.Household Income:The total of your income from all sources including wages, tips, bonuses, alimony, child support, social security/retirement benefits, unemployment compensation or disability, dividends and interest. Refer to your last federal income tax return for sources.Interest:The percentage of your balance that a bank or credit issuer charges for the money it lends to you.Late Fees:The charge tacked on to tardy payments. Late penalties average from $30 to $35 per monthLate Payment:Any monthly payment received even one day past the designated due date is considered late. Late payments usually incur extra charges and may appear on your credit report for up to seven years. A history of too many late payments may cause denial of credit in the future.(Note: Reporting timeframes may vary by company.)Liability:The money that is owed to the creditor is called a liability. A liability can be viewed as a "bill". A liability is your responsibility to repay a loan or credit account including purchases, fees and finance charges as described in the cardholder agreement. Minimum payment:The minimum amount a cardholder must pay to keep the account from defaulting. Usually this amount comes to 2 percent of the outstanding balance.Outstanding Balance:The total amount that you owe on a credit card or other loan. The outstanding balance is the amount you have borrowed plus any other fees and finance charges that may have accrued.Over the Credit Limit:When you have borrowed (charged) more than your credit line allows. If you exceed your limit, you will have to pay additional fees until the amount you owe falls within your assigned credit line.Over-the-Limit Fee:A fee charged for exceeding the credit limit on the card.Past Due:If your minimum monthly payment is not received by the due date, your account status is considered past due.Periodic rate:The interest rate described in relation to a specific amount of time. The monthly periodic rate, for example, is the cost of credit per month; the daily periodic rate is the cost of credit per day.PIN:The Personal Identification Number you choose as a password to access cash at ATM or debit machines.Posting Date:The date a transaction, fee or service charge appears on your account.Pre-Approved:A credit card offer with "pre-approved" only means that a potential customer has passed a preliminary credit-information screening. A credit card company can reject the customers it invited with "pre-approved" junk mail if it doesn't like the applicant's credit rating. Prepayment:Paying a portion or the entire amount of a loan or balance before it is due in order to reduce the amount of interest charged.Previous Balance:The total balance as of the end of the last billing cycle.Prime Rate:A common benchmark for consumer and business loans set by banks, usually at a level 3 percentage points higher than the Fed Funds rate. The rate given to consumers on their loans is often determined as the prime rate plus a certain percentage, which represents the lender's assessment of the risk in lending, plus its profit margin.Principal:The actual amount of money borrowed before interest or other fees (or the actual amount of the purchase or cash advance on a credit card).Promissory Note:A written promise to pay a sum of money to a specific individual. For credit card accounts, this information appears in your Cardholder Agreement.QuarterlyFour times a year, or every three months.Rebate Card/Rewards Card:A credit card that offers services, such as airline tickets, discounts on future purchases or cash refunds in exchange for card usage. The credits accumulated toward these benefits are often a percentage of each purchase.Revolving Credit:A line of credit that does not have a specified repayment schedule but may require a minimum payment to cover interest and contribute to paying off principal. Typical of credit card loans, checking account cash reserve or overdraft accounts that have pre-approved lines of credit.Secured Card:A credit card that a cardholder secures with a savings deposit to ensure payment of the outstanding balance if the cardholder defaults on payments. It is used by people new to credit, or people trying to rebuild their poor credit ratings.Secured Debt:A loan or credit line that requires collateral of equal or greater value than the amount of the loan. The issuer may take possession of the collateral if the borrower defaults.Semi-AnnuallyTwice a year, or every six months.Store Card:A store card is a proprietary card issued by a retailer. It allows you to purchase merchandise and services through the store, the store’s licensed businesses and with other select partners. They often offer special savings and benefits to add extra value.Teaser rate:Often called the introductory rate, it is the below-market interest rate offered to entice customers to switch credit cards or lenders.Transaction Date:The date that goods or services were purchased or the date the cash advance was made.Transaction Fee:An additional charge for various activities such as ATM usage or a cash advance. Unsecured Debt:Credit or loan that does not require collateral to guarantee funding. Borrowers may need a stronger credit history to be approved than with a secured loan.Variable Interest Rate:Percentage that a borrower pays for the use of money, and which fluctuates periodically based on changes in an interest rate index.Zero Balance:What shows on a credit card customer''s bill when the outstanding balance has been paid and no new charges have been incurred during the billing cycle ................
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