University of Illinois Extension

Credit Card Terms

Foreclosure: is a legal process by which a homeowner who defaults on a mortgage loses his or her interest in the property. There is a forced sale of the property at a public sale, with the sale's proceeds applied to the mortgage debt.

Garnish: is to withhold money from a person's paycheck to make sure he or she meets a financial obligation. One example would be child support payments that are collected through a garnishment.

Grace Period: is the length of time before interest is charged on the purchases. Most companies offer 20-25 day grace periods. People who carry a balance on their credit cards have no grace period.

Lender: is the private, public or institutional entity that makes funds available to others to borrow.

Lien: is the legal right of a creditor to hold a debtor's property or sell it to repay the debt. For example, the financial institution who lent money for a car loan holds the lien on the car's title until the car is paid in full.

Method of Calculating Finance Charges: is the way the issuer computes the monthly finance charge. Most companies use the average daily balance method to figure finance charges. Beware of a "two-cycle" average daily balance method.

Minimum Finance Charge: is the least amount that is needed to be paid if there is a balance on a credit card. This amount keeps the account from going into default. Card issuers require a minimum of two percent to four percent of the outstanding balance.

Over-The-Limit Fee: is a fee charged when a consumer exceeds the credit limit on their credit card.

Periodic Rate: is the APR divided by 12.

Phishing: is the act of sending an e-mail to a user falsely claiming to be an established legitimate enterprise in an attempt to scam the user into giving private information that will be used for identity theft. Typically, the e-mail recipient is told to verify or update account information to remedy a problem and is directed to click on a link provided in the e-mail. Or the person might be asked to complete a financially rewarding survey by visiting a Web site linked in the e-mail.

Pre-Approved: is when a credit card issuer offers "pre-approved" credit cards to potential customers who have passed a quick credit-information screening. The company does not have to issue the card if it does not like what it later learns about the applicant's credit rating.

Pretexting: is the practice of obtaining personal information under false pretenses. Pretexters sell the information to people who may use it to get credit in another person's name, steal assets, or investigate or sue a person. This is against the law.

Secured Credit Card: is a credit card that a cardholder must secure with a savings deposit so that the card issuer is guaranteed payment. The amount the cardholder can charge is limited by the amount he or she deposits in the savings account.

Secured Debt: is a debt that is secured by a lien on the debtor’s property that can be taken by the creditor in case of nonpayment by the debtor. Examples of secured property are a car and home.

Skimming:is a high tech method by which a thief captures personal or account information from a credit card, driver's license, or passport. An electronic device known as a "skimmer" is used to capture the information. The card is swiped through the skimmer, and the information contained in the magnetic strip on the card is stored on the device.

Strong Password: is a password that is difficult to detect by humans and computer programs. A strong password consists of at least six characters including a combination of upper and lower case letters, numbers and symbols.

Tangible Personal Property: is property that can be felt or touched, such as furniture or cars.

Teaser or Introductory Rate: is a below-market interest rate offered to entice customers to apply for or switch credit cards or lenders.

Transaction Fees: are fees that are paid for cash advances, late payments, or charging over the credit limit.

Variable (Adjustable) Interest Rate: is an interest rate that can change. How often it changes depends upon the terms of the contract and should be stated in the documents the creditor provides.

Unencumbered Property: is property that is not burdened with liens or other legal claims against it.

Universal default: is a policy of some lenders that allows them to punish borrowers who pay any creditor late. It is most commonly used by credit card companies and revealed in the fine print of their contracts with consumers.

Unsecured debt: is debt that isn't guaranteed by the pledge of specific property. Interest rates for unsecured debts, such as credit card bills, are usually higher than interest rates for secured debts like home mortgages and car loans.

Source: Bankrate Glossary, www.bankrate.com

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