A file with instructions for the exchange and settlement of electronic payments passed between financial institutions. It represents debits and credits to be deducted from an account automatically as they occur.

An affinity credit card is offered in conjunction with two parties, the first is the card issuer and the other is a non-financial group with which consumers have an affinity. Universities, sports franchises and non-profit organizations are examples of affinity groups

Loan payments you make during a set period of time (term of the loan). This is also called debt reduction by making monthly payments.

A fee a lender charges you for the privilege of having a credit card from them.

The total costs of the loan, which includes finance charges and fees. The APR is expressed as a percentage rate.

A person applying for credit privileges, employment or some other benefit.

Anything you own that has value or use.

Approval of a credit card transaction for a merchant by the card-issuing bank.

A code assigned by the card issuing bank to a credit card sale to show that the transaction is authorized.

An authorized user is an individual, or group of individuals who have access to a credit card account, other than the primary cardholder. However, the authorized user usually does not have full access to a credit card account as would the primary cardholder.

The total amount of money that you can borrow from a lender.

The average balance is for each day in the billing period, and is calculated by adding all daily balances together and dividing that total amount by the number of days in the billing period. This can be useful to you and credit companies as a guideline for your spending habits.

An account that is deemed uncollectible is written off the creditor books to bad debt.

The total amount of money you owe on your debt. This includes principal, interest, and all fees.

The process of moving one outstanding balance from one credit card issuer to another.

A balance transfer fee is a transaction fee that is charged to the cardholder's account when transferring an outstanding balance from one credit card to another.

A loan with a balloon payment requires that a single, lump-sum payment be made at the end of the loan.

A credit card issued by a bank [Rosenberg, 93]. Visa and MasterCard are bank cards. American Express and Discover are not.

A proceeding in U.S. Federal Court that may legally release a person from repaying debts owed. The law contains several chapters which relate to different methods of relief:
Chapter 7 - Straight Bankruptcy (total liquidation of assets)
Chapter 11 - Business Reorganizations
Chapter 12 - Farm Debt Bankruptcy
Chapter 13 - Wage Earner Repayment Plan

The number of days in the billing period. It includes the day after the previous close date through the current closing date of the account.

The billing statement is the monthly bill sent by a credit issuer to the customer. It gives a summary of activity on an account, including balance, purchases, payments, credits and finance charges. Important changes to a credit card account are often included in small-print fliers that are sent with the statement.

A budget contains a list of the items and amount of money you spend (expenses) and compares that to the total amount of money that is brought into your household (income).

Any person who holds a payment card account (bankcard or otherwise). Person that uses a credit card to purchase goods and services.

A fee assessed on the date a new cash advance transaction is posted to an account. If your spending habits include accessing accounts for cash, you want to avoid this kind of fee or look for the lowest one possible.

Like a pre-paid phone card, cash cards have a set cash amount value and are debited for each use. Therefore, similar to that of losing cash, if the cash card is lost or stolen, it can be used by anyone. Neither can it be cancelled, as can a lost, or stolen credit card.

A credit card transaction that is billed back to the merchant who made the sale. This happens when a credit cardholder disputes a charge on their bill by claiming the product was never delivered or the cardholder was dissatisfied with it in some way. Cardholders are suppose to try to obtain satisfaction from the merchant before disputing the bill with the credit card issuer.

A card which requires payment in full upon receipt of the statement.

Your account is "charged-off" after you quit making full payments for a certain period of time. Charged-off usually means that your creditor thinks that it is time to let a collection agency or a collection attorney collect money from you. Accounts are usually charged-off after you miss two or three payments.

A loan you receive for a specific period of time. Your Ways to Work loan is an example of a closed-end loan.

The meeting you attend with your lender to sign the loan documents for loan funds to be disbursed.

Past due accounts enter the collection stage and remain there until the account is brought current (paid up to date).

Typically, an account goes into collections after it has gone unpaid for 90 days or more.
Usually the creditor will enlist the help of an independent collection agency after their in-house attempts to collect on the account have failed. Sometimes a creditor may even sell the account to a collection agency for a fraction of the amount owed. The collection agency is then entitled to 100% of the money they receive and will report a separate Collection Account to your credit report to represent their effort. Note: the same account will therefore be listed twice on your report - once by the creditor, and again by the collection agency. After being sold by the creditor the same account may be sold again and again from one collection agency to another and each will usually register a new collection account on your credit report. You have substantial legal protection to shield you from the harassment of collection agencies.

An agent hired by a creditor to collect on a debt.

Property that is pledged to a creditor that can be repossessed if you fail to pay as agreed. For Ways to Work loans, this is usually your car and/or household goods. Collateral is also called security.

A loan approval that you receive which is based on certain requirements you need to complete. Your Ways to Work approval letter is an example of a conditional approval.

The person who applies for a loan with you and who is equally responsible for payment the debt.

Truth in Lending helps you compare costs by requiring creditors to give you certain basic information about the cost of buying on credit or taking out a loan. These disclosures can help you shop around for the best deal. Consumer lending disclosures can help you compare the cost and terms of one lease with another and with the cost and terms of buying for cash or on credit. Credit costs vary. By remembering two terms, you can compare credit prices from different sources. Under Truth in Lending, the creditor must tell you (in writing and before you sign any agreement) the finance charge and the annual percentage rate. The finance charge is the total dollar amount you pay to use credit. It includes interest costs, and other costs, such as service charges and some credit-related insurance premiums.

CCCS is a service that offers counseling about how to work out a realistic budget and debt repayment plan and work with creditors. The goal is to ensure that debts are paid back over time.

A company that collects information on how you pay your bills, public records, addresses, and employment.

A trust or a promise to pay later for goods or services purchased today.

A rectangular piece of plastic used instead of cash or checks authorizing payment for goods and services.

A policy usually offered by a third party that covers at least the minimum payment (often for a limited period of time) in the event the cardholder loses his, or her job, dies, or becomes disabled.

A rating (or score) calculated by the credit bureaus and based on your past payment behavior, income, employment and other factors that serve as a general predictor of ability to repay debts. Each credit bureau has their own formula for getting this score, that is why when keeping an eye on your credit you want to get the reports from all three bureaus.

A record of the lenders you borrowed money from and how you paid them.

The institution (e.g. bank, credit card company) or person that you borrow money from or arrange credit.

Simply the annual percentage rate divided by the number of days in a year (often referred to as the 'daily interest rate').

A type of ATM card that withdraws funds directly from your checking account for each purchase that is made with the card. There are no finance charges, and your limit is represented by the amount of money in your checking account.

The total amount of money you owe to your creditor(s).

A way to gauge financial security- it’s monthly debt divided by monthly income

Failure to make timely payment.

You are delinquent if you are behind on your payment schedule.

A paperless transfer of funds authorized and/or initiated from a computer, telephone, or magnetic strip. An example of an EFT - a cardholder authorizing a direct deposit over the phone with his, or her credit card.

Entering and processing the sales drafts by electronic means.

A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

A federal law, established in 1971, and revised in 1997, which enables consumers to learn what information Credit Reporting Agencies have on file about them, and to dispute inaccurate data in the file. It also establishes specific permissible purposes for which credit reports may be requested, and places time limits on how long adverse information may be reported.

A mathematical calculation that lenders use so as to evaluate the risk associated with lending you money. FICO stands for Fair Isaac Company, the company that originally created the formula.

The amount of money you pay to borrow money from your lender. This includes interest, service fees, and any insurance premiums.

The lender "stops the clock" in a way. You still owe the full balance and already accrued fees which you will have to resume paying when the clock starts again. This is a temporary arrangement made under specific circumstances such as a loss of employment.

Legal process whereas a creditor has obtained judgment on a debt may obtain full or partial payment by seizure of a portion of a debtor's assets (wages, bank account, etc...).

The money you make from your job before any deductions are taken.

A period of time you can make your payment that is after your scheduled payment due date. During this time (grace period), you will accumulate additional finance charges.

The person responsible for paying a bill.

A loan based on the difference of the amount you own on your home, and the home's current market value.

Independent sales organizations play a role in many business fields. In the credit card industry ISOs act as a third party between the merchant and the acquiring bank. Many businesses are unable to obtain merchant status through an acquiring bank because the bank views them as too large a risk, and need to go through an ISO to obtain merchant status.

The index is the standard rate, such as the prime rate, to which a margin amount is applied to calculate a variable interest rate. (For example: Prime + 2.9%) Variable rate cards are more feasible for consumers that pay off their balances at the end of each month. Therefore, if the economy hits a slump and rates go up you avoid the rate increase.

The transaction that takes place between the acquiring bank and the credit card-issuing bank.

A fee the acquiring bank pays to the credit card-issuing bank in order to process a credit card transaction involving a card holder's account. This fee is regulated by MasterCard and Visa, and is a percentage of the total transaction amount.

The rate of interest on your loan or financing instrument.

Credit cards often offer lower or 0% introductory APRs as special promotional offers. After a period of time, the rate returns to the standard rate. It is very important to read the terms and conditions so that you understand how long the introductory rate will last and what the rate will be after the introductory period.

Issued to a couple based on both of their assets, incomes and credit reports. It generally results in a higher credit limit, but makes both parties responsible for repaying the debt.

This is a legal court order that says there is no dispute and you owe money. In many states, your wages can be garnished or monies taken out of your bank accounts after the date of judgment.

The amount of money you are charged for making your payment(s) after the due date or grace period.

A payment you make after the due date or grace period.

Liability refers to the responsibility of the borrower for charges to an account. Generally, a cardholder agrees to be liable for any charges to his or her account, including purchases, fees and finance charges. If the cardholder allows someone else to make charges to his or her account (through, for example, an additional card), the cardholder is still responsible for paying the bill. Two people who apply for a card together may both be responsible for the entire balance. Your liability is described in the cardholder agreement you receive from the issuer.

A legal instrument showing a financial interest is held on the property (car, home, etc.) until the item is paid in full. This property can be repossessed if you fail to pay as agreed.

Liquidation is the process of converting assets into cash to pay off creditors. This process is used in personal and corporate bankruptcy as a solution to getting out of debt with lenders.

A group of people who decide to approve or deny your loan application.

A bank that has a business relationship with a merchant and receives all credit card transactions from that merchant.

A percentage of the retail sale the merchant pays as a fee to the acquiring bank for processing the credit card transaction . You can bet that this fee is always higher than the interchange fee the acquiring bank pays.

A business is considered a "merchant" once they have authorization from an acquiring bank, ISO, or other financial institution to accept credit cards.

Represents the minimum amount of money you are obligated to pay each month against your credit card balance. The figure is determined by the size of the balance and the formula the lender chooses to use in determining the minimum amount due.

A lien or claim against real property given by the buyer to the lender as security for money borrowed.
1st Mortgage-Also known as the "primary" mortgage-has priority over the claims of subsequent lenders for the same property.
2nd Mortgage-Also know as the "secondary" mortgage-is a loan secured by mortgage or trust deed, which lien is "junior" to another mortgage or trust.

The amount of money you receive in your paycheck after all deductions are made.

A fee that occurs when there is not enough money in an account to cover a given transaction.

The outstanding balance is the amount you owe (balance) on your credit card. This is the balance used to calculate payments on which interest is charged.

The fee that may be imposed if your outstanding balance exceeds your credit limit. It is very important to keep track of your balance, especially when using multiple cards.

This is the rate the card issuer applies to your outstanding balance to calculate the finance charge (interest payment) for each billing period. This is also important to check on each statement you receive each month. You may think that you understand what the bank is charging you, but you may be shocked to find that terms have changed and you are now paying much more.

As defined in section 604 of the Fair Credit Reporting Act, only the named reasons for requesting a credit report are deemed "permissible". Requests not meeting these criteria must be denied.

The maximum amount you can owe at any time, based on your income, debt and your credit history.

A loan based on your income, debt and credit history.

A conditional offer of credit from a credit card issuer based on a pre-qualification of the individual’s credit from an abbreviated credit bureau report or based on final score. Upon acceptance of such an offer, the issuer makes a credit decision (usually after obtaining more detailed credit information) and assigns an APR based on the most current credit profile of the customer.

Prime is the interest rate a bank charges to its best or "prime" customers. Each bank will quote a prime lending rate. Many institutions quote prime rates established by large money center commercial banks such as Citibank or Chase Manhattan. There is also a prime rate average listed in the Wall Street Journal that is an average of the largest commercial banks. The rate given to consumers on their credit cards is often based as the prime rate plus a certain percentage that represents the lender's assessment of the risk in lending plus its profit margin.

Information obtained by the Credit Reporting Agency from court records , such as liens, bankruptcy filings and judgments. Public records are open to any person who requests to see them.

The amount of money you owe without interest and fees.

Under Reg Z, credit card issuers are required to disclose the terms and conditions to potential and existing cardholders at the point of account opening and at regular intervals. Upon soliciting and opening new credit card accounts, issuers must disclose key information relevant to the costs of using the card, including the applicable interest rate that will be assessed on any outstanding balances and several key fees or other charges that may apply, such as the fee for making a late payment. In addition, issuers must provide consumers with an initial disclosure statement before the first transaction is made with a card. The card member agreement is the governing document for the account and provides more comprehensive.

The act of a creditor taking your collateral (e.g. your car) if you don't pay your loan as stated in your loan papers.

This is an agreement to lend a specific amount to a borrower, and to allow that amount to be borrowed again once it has been repaid. Most credit cards offer revolving credit.

An instrument showing an obligation on the cardholder's part to pay money, (i.e.. the sale amount), to the card issuer. This is the piece of paper that you sign when making a purchase with your credit card. Sales draft data can be "captured" electronically and sent to be processed over the financial networks.

A type of credit card that requires making a deposit into a bank account as security for the credit card. This amount is your credit limit. If you don't make your payments as agreed (default), the bank is secured because it already has your money and will take it out of your bank account.

Okay, this term is really more of a trivia answer than a term you need to know, but it is interesting any way. The Schumer Box is named for Senator Charles Schumer, D – NY, the former chairman of the Senate Banking Committee that passed landmark consumer protection legislation (RegZ). This standardized disclosure “box” features relatively consistent terms and conditions for credit card offers and specific terms and conditions such as purchase and cash advance interest rates, annual fees and rate calculation methods. The disclosure are required for all new account solicitations.

The lender agrees to take less than your full balance as payment.

An electronic prepaid cash card, usually sold at banks and are exchanged at face value.

The length of time from the start of your loan until you are scheduled to pay it in full.

Capacity - Your ability (present and future) to pay your loan.
Character - Your willingness to pay your loan.
Collateral - Property that is pledged to a creditor that can be repossessed if you fail to pay.

A rewards earning calculation that is typically disclosed as “up to” a certain percentage cash back. Various spending tiers earn increasing percentage rewards, up to the maximum amount advertised. For example, a reward offer advertised as up to 1% cash back could involve .25% for the first $1,000 in spending, .5% for the next $1,000 and 1% for all spending > $2,000.

A legal document that proves who owns the property.

The sum of the Monthly Finance Charge and any Cash Advance Transaction Finance Charges (or the Minimum Finance Charge, if applicable)

The amount of money a car dealer will give you for your current car. This amount is then applied to the purchase price of your new car.

Most issuers charge a fee if you use the card to get a cash advance, if you fail to make a payment on time or if you exceed your credit limit. Some may charge a flat fee every month whether you use the card or not. The type of transaction fees depends on the credit card company.

The Truth in Lending Act (TILA) is the primary federal law governing the extension of consumer credit by lender in the United States. Congress instituted the TILA in 1968 to ensure more accurate disclosure of credit terms so that consumers could compare the various credit terms available, to avoid the uninformed use of credit, and to protect them against inaccurate and unfair credit billing and credit card practices.

Two-cycle billing is also known as double-cycle billing. The balance computation method used by some issuers that allows them to apply interest charges to two full cycles of card balances, rather than the most recent billing cycle’s balances. With this type of calculation interest gets charges to your account whether you pay of your card each month or not.

A type of credit card that doesn’t require you to deposit money into a bank account in order to obtain a credit card.

Universal default is a provision allowing issuers to increase card members’ interest rates for any adverse financial actions such as when cardholders failed to make timely payments to other creditors, like other credit card issuers, utilities, car lenders, property owners or mortgage lenders.

A loan where you do not put up something of value as collateral. Generally, the signature of the borrower is all that is required.

With variable-rate cards, the APR changes when interest rates or other economic indicators change. Also known as a floating rate. A variable rate may not be a good idea for someone that carried a balance.

Similar to a Debt Management Program, the bank may eliminate fees and cut your interest rate to get your finances under control. It may result in a lower credit limit and you may have to agree to stop using the card.