Debt Logistics Glossary of Terms
The terms defined below may or may not be familiar to you. Included within this list are standard credit card industry terms as well as terms you will encounter within the Debt Logistics site.
Account Number
The unique set of numbers assigned to the credit card holder by the issuing financial institution which identifies the account. Most often these account numbers are embossed on the front of the plastic card utilized during credit card activities.
Additional Card Holder
Another individual authorized to utilize the credit card besides the primary cardholder who is responsible for repaying the incurred debt.
Additional Principal Payment
Extra money paid above the minimum payment required by the financial institution. Paying an extra amount enables the loan to be paid in a shorter time span.
Annual Fee
The amount of money charged upon a yearly basis in order to ensure continued availability of the account. Note: the annual fee is a separate charge from the interest rate, late charge, or other designated charges.
Annual Percentage Rate (APR)
The yearly percentage rate charged by the financial institution on the credit card account.
ATM
Automated Teller Machines allow you to access cash through withdrawals.
An individual may access cash in a checking account or initiate a loan by a
cash advance method. In the event of a credit card cash advance the amount borrowed
is placed in a sub-account of the credit card. The percentage rate for cash
advances is different, usually higher, than the credit card purchase rate.
Balance Transfer
The movement of one or more balances from one credit card to another. This activity usually initiates a transfer fee. The transfer fee typically ranges from 1% to 5% of the transfer amount.
Bankcard
The card issued by a bank to facilitate purchases and or cash advances.
Billing Cycle
The time between periodic billing periods. Theses cycles may be variable but are usually 28 – 31 days.
Card Issuer
This is the financial institution, bank, credit union, or other company who grants the cardholder the right to incur debt obligations on the designated account.
Cardholder
The individual who is the responsible party on the account or the individual who is allowed to also charge on the account.
Cash Advance
Utilizing a credit card to obtain cash from an ATM or by bank withdrawal as a loan. Cash Advances, one of the typical sub-accounts of the credit card account, frequently incur a higher APR than purchases.
Credit Card Agreement
A written agreement, contract, listing the terms and policies which govern the use of a credit card account. Included in the written statement are: the APR, monthly minimum formula, annual fee, dispute rights, etc. Any alteration of the terms must be presented in writing to the credit card account holder.
Credit Card Debt Optimization
The system utilized by Debt Logistics to recommend a method of credit card payments to rapidly decrease personal debt. Following the prescribed plan without incurring additional debt should increase an individual’s credit availability. The amount of credit an individual has available has a direct impact on their credit rating (FICO Score).
Credit Repository
A Credit Repository is often referred to as a credit bureau. This data collection business gathers information concerning an individual’s record of repaying debt obligations. Financial institutions request an individual’s past records for evaluation prior to issuing a credit card account. The repayment history influences the percentage rate the individual is given by a financial institution.
Credit Limit
The limit of money the card issuer is allowed to borrow on the credit card account. Fees may be assessed when this limit is exceeded.
Credit History
This is a compilation of the manner in which an individual has repaid previous debt obligations. This compilation includes whether bills are paid on time, how close each account is to the credit limit, the number of accounts an individual has with a balance, etc. Information regarding mortgages and auto loans along with debt information are frequently included. This information is collected and distributed on request by credit reporting agencies.
Debit
A manner of immediately deducting the amount of a purchase, ATM withdrawal, or charge from the indicated account. Usually this activity takes place within 2 or 3 days of the purchase date.
Debt Consolidation
This is usually a big loan or credit card balance transfer that is used to pay off smaller balances.
Debt Consolidation Company
A company that negotiates with credit card issuers to decrease an individual’s amount of debt. The individual’s reduced balances are rolled into one account. The individual then pays the company one monthly payment. Warning: The credit reporting agencies consider this action a ‘lite bankruptcy’. The impact is a significant lowering of the individual’s FICO Score (Credit rating).
Double Cycle Billing
This interest charge utilizes the last two months of credit card purchases and activities in order to assess interest.
FICO Score
A numerical rating issued by the credit repositories, which ranks an individual’s history on the repayment of their debt obligations. This rating is decreased by late payments, credit card accounts at the maximum limits, and numerous other factors.
Finance Charge
Money charged to the credit card account holder for items such as, interest accrued, late fees, over-limit fees, cash advance fees, or balance transfer fees. May be calculated by a formula such as: Average daily balance x daily periodic rate x number of days in the billing cycle.
Fixed Rate
This may also be known as a Fixed APR. This percentage rate remains the same for a year. Fixed Rate differs from an Introductory APR which frequently is only for a specified time at the time an account is established, or when a transfer occurs.
Grace Period
The designated period of time, usually 28 – 30 days, in which the account holder may pay the entire amount charged without paying interest or other fees, such as late fees.
Introductory Rate
May also be called the Intro APR. The percentage rate charged for a specified, temporary time frame. This percentage rate is traditionally lower than the Fixed APR and may sometimes be 0%.
Issuer
The financial institution, bank, credit union or other company, which grants the account holder the right to charge on the credit card account.
Late Charges
An additional amount of money added to the charge account balance for payments received after the specified payment due date. Note: late fees may be assessed for payments not received by the issuer’s collection department by the specified date on the monthly statement, but also may be added for failure to use the envelope provided by the card issuer or writing a note on the return statement.
Ladder Payment System
The method of paying credit card debt by which the highest balance or highest percentage accounts are paid a larger payment while paying the minimum payment on credit cards with a lower percentage rate. As the highest accounts are paid the card holder selects the next highest APR account on which to pay the maximum affordable amount.
Minimum Payment
That amount of payment listed upon the monthly credit card charge billing statement which the credit card account holder must pay each month. The Minimum Payment is composed of the interest payment for the previous month as well as a fraction of the lowest percentage rate sub-account. Example: If the credit card account holder has a purchase account interest rate of 12% and a cash advance account of 14%, the Minimum Payment required will include the part of the 12% interest and probably 2 – 4% of the purchase account balance. Note: The purchase account must reach a zero balance before any payment is applied to the higher percentage rate cash advance account.
Overlimit
The term refers to a credit card charge account with a balance that exceeds the credit limit established for the account. The card issuer will assess a fee for being outside of the maximum range as well as insist upon payment of the amount in excess of the maximum limit.
Periodic Rate:
The percentage rate for a specific amount of time. For example, the monthly percentage rate may be the annual percentage rate divided by 12. The daily rate may be the annual rate divided by 365. The method of calculation should be found in the credit card account agreement.
Plastic
Refers to the credit card with the account information encoded and used to record the charge activity.
Point of Sale (POS)
A merchant’s location where the purchase of goods and the charge of those goods occurs.
Posting
Term used to record a charge activity to the card holder’s account. May also be the act of recording a payment on the credit card holder’s account.
Pre-Approved
This is a preliminary advertising offer sent by a financial institution to encourage an individual to apply for a new credit card account. The offer does not guarantee the advertised rate. When the individual’s application is received a thorough credit history examination is performed to determine the percentage rate for that particular individual.
Prime Rate
Reportedly the percentage rate banks charge the most creditworthy customers. Interest percentage rates may be represented as “Prime Rate plus some %”.
Recurring Billing
Transactions a credit card holder may place on his account for periodic payments.
Secured Credit Cards
Credit Card accounts which the financial institution issues and protects the money lent by obtaining collateral (deposited money, car, or even home) from the credit card holder.
Service Charge
Money added to the balance of the credit card account for an incident such as a payment posted late, due to be account holder writing on the return payment portion of the monthly statement.
Statement
A financial institution’s written record containing the periodic activity for the account. Most generally the account holder’s name, address, account number as well as the financial entity’s address and phone numbers are included. The information should include those account charges and payments, which have occurred since the last statement. The report should indicate: payments, fees assessed, interest – the percentage rate and the dollar amount, refunds, and account number.
Sub-Account
Divisions or sections with the credit card account often found to have varying percentage rates. The sub-account, such as the Purchase sub-account, more often than not has a lower percentage rate than say a cash advance sub-account. Note: Account holder payments are applied first to the lower percentage sub-account. This action by the financial institutions allows the cash advance balance to incur the higher interest. The interest, of course, increases the sub-account balance.
Transfer
The act of moving money from one account to another.
Transfer Fee
The amount of money the financial institution charges to move balances from one account to another.
Two Cycle Billing
This interest charge utilizes the last two months of credit card purchases and activities in order to assess interest.
Universal Default
The term for a practice in the financial services industry for a
lender to change the terms of an agreement from the normal terms to the default terms
(i.e. the terms and rates given to those who have missed payments on a loan) when that
lender is informed that their customer has defaulted with another lender, even though
the customer has not defaulted with the first lender.
The growing use of this technique is one of the most controversial trends in the financial services industry.
Unsecured Credit Card
Credit card accounts which are established without the account holder being required to furnish collateral. The account holder is granted the credit card based upon a credit history which demonstrates a pattern of meeting money obligations in a timely fashion.
Variable Interest Rate
A rate which can fluctuate based upon the current national percentage interest rate.
