Credit Card Glossary for Those Moving to a New Home

Moving to a new home may be the achievement of a goal many years in the making.  This is an exciting time for you and your family.  There are many new experiences that lie ahead and memories to make in your new home.

You may not be thinking about credit card debt right now, however you should be.  There are specific terms and definitions you should know in relation to your move.  Educate yourself so you know what all the fine print means in real terms!

Additional Cardholder

When you have a credit card, it is often possible to add an additional card to the account for use by someone else. The main cardholder remains responsible for making payments on all charges made, whether by the original cardholder or the additional cardholder.

Annual Fees

Annual membership or participation fee charged by most credit card companies. On average, the fee ranges from $15 to $55. Some issuers charge no annual fee.

Annual Percentage Rate

The yearly percentage rate imposed when a balance is held on a credit card. When an outstanding balance is held, this rate is applied to your outstanding balance each month.

Authorized User

A person given permission to use a credit card account.

Automatic Payment

Automatic payment is a process that authorizes regular withdrawals to be made from checking or other deposit account to pay credit card and other bills.

Available Credit

The available credit on a credit card is the amount of money that can be charged on a specific credit card without going over the limit. It is the difference between the credit limit and the outstanding charges on the account. For example, if you have a balance of $100 on a credit card and your limit is $150; your available credit is $50.

Balance Transfer

A balance transfer occurs when an outstanding balance on one credit card is moved to another credit card account. This will be done by consumers when they are looking to save money on interest rates by moving their credit card balance to another card with a lower annual percentage rate. Many credit card issuers will offer low introductory interest rates to attract new customers. However, there are typically fees due along with balance transfers and introductory rates typically last for a few months to a year.

Balance Transfer Fee

A balance transfer fee is a fee charged by a credit card company to transfer a balance from one account to another. This fee can be anywhere from 1 percent to 5 percent of the balance amount. The fee may or may not have a cap -- in other words, a maximum amount. Contact the credit card issuer for their specific fees.

Balance-to-Limit Ratio

Balance-to-limit ratio is used in the calculation of credit scores. It compares the amount of credit being used to the total credt available to the borrower. Having a low ratio -- in other words, not much debt but a lot of available credit -- is good for your credit score. Also known as a credit utilization ratio.

Cash Advance

A cash advance is a cash loan from a credit card, using an ATM, a bank withdrawal or 'convenience' checks. Credit card cash advances have many disadvantages for consumers. Generally, you cannot take a cash advance for the full amount of your available credit. The interest rate on cash advances is often significantly higher than it is on purchases or balance transfers. If you carry balancnes with both high-interest cash advances and low-interest purchases on the same card, it is current industry practice to apply payments to the low-rate balance first, increasing total interest rate costs. A transaction fee, which is a percentage of the cash advance, is usually charged. There is typically no grace period for cash advances.

Charge-Back

A charge-back is a transaction returned through a credit card processing interchange by an issuer to an acquirer. Consumers may, under certain circumstances, dispute a purchase made from a merchant and cause a charge-back. A transaction also may be returned because it was noncompliant with the merchant account rules. Sometimes spelled chargeback.

Charge-Back Period

The charge-back period is the number of days, from the transaction's processing date or endorsement date, during which the issuer may initiate a charge-back.

Co-Signer

A joint signer of a credit card application with the principal applicant. Should the principal applicant default on what he owes, the co-singer is responsible for paying the balance due.

Convenience Checks

Convenience checks are checks linked to your credit line that can be used just like checks linked to your checking account. Convenience checks can be made in any amount, as long as it does not surpass your credit limit. They are treated like a cash advance, meaning there is no grace period and interest is charged from the moment the check is used. They also tend to have higher interest rates than that charged for purchases.

Credit Bureau

A company that collects and sells information about how people handle credit. It issues credit reports that list how individuals manage their debts and make payments, how much untapped credit they have available and whether they have applied for any loans. The reports are made available to individuals and to creditors who profess to have a legitimate need for the information. The three major national credit bureaus are Equifax, Experian (formerly TRW) and Trans Union.

Credit History

A record of a person's debt payments.

Credit Inquiry

A credit inquiry is created when a lender pulls someone's credit record. It creates a record in a credit report of each time the borrower, a lender or a potential lender obtains a copy of the consumer's credit report. Credit inquiries, especially multiple inquries, may negatively impact credit scores. See hard inquiry and soft inquiry.

Credit Limit

A credit limit or credit line is the maximum amount of money that can be charged to a credit card account.

Credit Line

A credit limit or credit line is the maximum amount of money that can be charged to a credit card account.

Credit Report

If you have ever applied for a credit card, a personal loan, or insurance, there is a file about you. This file includes where you work and live, how you pay your bills. It even includes whether you have been sued, arrested, or filed for bankruptcy.
Credit Reporting Agencies gather and sell this information to creditors, employers, insurers and other businesses. Periodically check your credit report for accuracy to know what has been reported and correct any errors. To check on your credit report contact the three major national credit bureaus: Equifax, Experian and Trans Union.

Credit Score

A credit score is a three digits number that summarizes how well a person or business has handled debt. Higher numbers indicate a better credit rating and allow for larger loans and better interest rates. Low numbers will indicate a worse credit rating and therefore borrowers will have terms with higher interest rates, less amounts available to borrow and may be turned down for loans or lines of credit. Though there are a variety of indicators of credit, the best known and most widely used system is the Fair Isaac Corp. (FICO) product.

Credit Utilization Ratio

A credit utilization ratio is used in the calculation of credit scores. It compares the amount of credit being used to the total credit available to the borrower. Having a low ratio -- in other words, not much debt but a lot of available credit -- is good for your credit score. Also known as a balance-to-limit ratio.

Debt Consolidation

Debt consolidations is when multiple loans are combined into a new, single loan that offers a lower monthly interest rate and payment, or a longer repayment period. Many times, consumers will consolidate debt by transferring multiple balances of several high-interest rate credit cards on to a single, lower interest credit card account.

Default

Default is to fail to make the minimal payment on a credit card by the due date. If this occurs, credit card issuers may raise interest rates to the default rate, decrease the line of credit, or send the balance to collections. Depending on the creditor, a credit card will not typically be place in collections until a payment is 3 to 6 months delinquent. In situations of serious delinquency, the creditor may take legal action or garnish wages to enforce repayment.

Default APR or Penalty Rate

If a payment is made late on a credit card balance, the standard APR that was set at the beginning of the contract may increase to the default APR or penalty rate. This is typically much higher than the original APR. The default APR may be applied to all outstanding balances on the credit card account.

Due Date

Credit card bills have a due date. If your credit card payment does not arrive -- and get posted -- by the due date, you will be charged a late fee. It's important for credit cardholders to watch their payment due dates, since they sometimes change. Some credit card issuers allow their customers to set their own due dates.

F - Fixed

If the letter 'F' follows the annual percentage rate (APR), the rate is fixed and not adjustable.

FICO Score

The software used to calculate a great number of credit scores was created by Fair Isaac Corporation--FICO.

Foreign Transaction Fee

Foreign transaction fees are charged by most credit card companies on purchases made in a foreign currency, or on purchases that involve a foreign bank (regardless of whether a foreign currency is used). Usually, foreign exchange fees are a percentage of the amount of each foreign currency purchase, with no minimum or maximum. Sometimes this fee is called a foreign exchange fee. It once was called a currency conversion fee. Foreign transaction fees are charged by U.S. transaction processors such as Visa and MasterCard. The card issuing bank may choose to pass that fee along to consumers; most do, and some tack on their own fees.

Fraud Alert

A fraud alert is a security alert placed on a credit card account or credit bureau listing by either the customer or the issuer when a fraudulent account activity is either experienced or suspected. Fraud alerts are also known as credit freezes.

Fraudulent User

A fraudulent user is an individual who is not the credit cardholder or designee and who uses a credit card account to obtain goods or services without the cardholder's consent.

Hard Inquiry

Hard inquiry is a credit scoring term. It describes when a consumer has applied for a loan. The potential lender checks the consumer's credit report, which creates a small negative impact on the consumer's credit score. An occasional hard inquiry, or a quick burst of hard inquiries, have little impact on credit scores; the credit scoring formulas recognize routine loan shopping. What hurts a credit score most are multiple hard inquiries over a long period. A hard inquiry is also known as a 'hard pull.'

Introductory Rate

The 'teaser' low rate charged by a lender for an initial, temporary period to encourage customers to switch cards. After the introductory period is over, the charged rate increases to the indexed rate or the interest rate.

Joint Account

A joint account is a bank account equally shared by two or more individuals. Parties involved all share the associated rights and liabilities of the account and are regarded by law as co-owners of the account. This means that if anything happens to the account, such as defaults, overdrafts and fraud, all parties are affected.

Late Payment Fee

Penalty charged for not paying the monthly payment by the due date or published deadline of payment printed on the billing statement (creditor must receive payment by this date). The fee can be a flat percentage fee or a percentage of the amount of the cash advance.

Minimum Payment

The smallest amount of money paid to keep the account from going into default. Often a minimum of 2% of the outstanding balance.

Online Bill Presentment and Payment

Online bill presentment and payment is a process that allows consumers to receive, view and pay certain bills online via computer, by transferring money from their checking accounts or charging bills to their credit card. Online bill presentment means that bills arrive online, not by mail.

Overdraft Protection

Overdraft protection is a service that automatically transfers funds from one bank account to another in order to avoid overdraft fees when insufficient funds are available. It can apply to savings accounts, checking accounts, lines of credit or credit cards. Overdraft protection carries its own fees, however. Usually, the service is automatically applied when an account is opened and the customer must opt out; other times consumers must sign up for the service.

Overlimit

Overlimit, or over-the-limit, means that the amount of debt that is charged to a credit card account is higher than the balance that is agreed to and allowed by the credit card lender. When a cardholder attempts to make purchases that will surpass the credit limit, the card issuer may decline the transaction or charge overlimit fees.

Payment Due Date

The payment due date is the monthly date when at least a minimum payment is due to be paid on a credit card account. It may not fall on the same date each month.

Reward Card

A credit card carrying an incentive or 'reward' for use, typically involving cash back, merchandise points or frequent flier points. Many different reward schemes have evolved to encourage particular uses (such as grocery or dining purchases, or travel). See Tiered reward cards.

Schumer Box

The Schumer Box is named for the then-chairman of the Senate Banking Committee that passed landmark consumer protection legislation, Sen. Charles Schumer. This standardized disclosure 'box' features relatively consistent terms and conditions for credit card offers, which allows consumers to compare cards in a consistent way. Specific terms and conditions such as purchase and cash advance interest rates, annual fees and rate calculation methods are required to be spelled out for consumers in conjunction with all new account solicitations.

Teaser Rate

The introductory rate. Usually a temporary lower rate to encourage customers to switch credit cards. After the teaser rate is over, the charged rate increases to the indexed rate or the interest rate