Glossary
1. Account holder
A credit card account holder is the person or persons responsible for paying the amounts charged. A person can be allowed to use a credit card as an authorized user but not be legally liable for the debt.
2. Account number
An account number is a unique number assigned by a financial institution to a credit card customer. On a credit card, the account number is usually embossed and encoded on the face of the plastic.
3. Acquiring financial institution
An acquiring financial institution, or acquirer, is a bank that processes and settles a merchant’s daily credit card transactions, and then in turn settles those transactions with the card issuer/association.
4. 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.
5. Adjusted balance
The adjusted balance method is a formula many card issuers use to calculate monthly payments. Issuers subtract payments made during the month on a credit card account, along with adding finance charges incurred.
6. Adverse action
An adverse action is a decision by a creditor, based on a credit score, that causes the creditor to deny a consumer access to credit, or to offer anything less than the best terms available. Federal rules went into effect in 2011 requiring lenders to give to consumers a detailed explanation of the adverse action. In practice, that has meant if consumers are denied credit or given less than the best terms, the lender makes available a free copy of the credit score that triggered the decision.
7. Adverse credit history
A term used by lenders to define and classify consumers with less-than-perfect credit histories when being considered for a loan or credit. An adverse credit history can include late payments of 90 days or more, deficiency judgments, garnishment orders, repossessions, bankruptcy, foreclosures, tax liens and/or debt write-offs.
1. Account holder
A credit card account holder is the person or persons responsible for paying the amounts charged. A person can be allowed to use a credit card as an authorized user but not be legally liable for the debt.
8. Affinity card
An affinity card is a credit card offered in conjunction with two organizations, one a card issuer and the other a nonfinancial group with which consumers have an affinity. Universities, sports franchises and non profit organizations are examples of affinity groups that often offer special discounts or deals for using their credit cards issued in partnership with a major bank.
9. Alternative methods of payment (AMOP)
Alternative methods of payment (AMOP) is a term covers the spectrum of noncash payments, including: credit and debit cards; billing extensions (adding purchases to your telephone or cable TV bill, for example); value access services (frequent flyer programs, credit card bonus programs, etc.).
10. Annual fee
An annual (yearly) fee charged by a credit card company each year for use of a credit card. This is a separate fee from interest rate on purchases. While annual fees were once common, they largely disappeared in the ’80s and ’90s, remaining only on a few classes of cards, such as secured cards or those that offer airline frequent flyer miles as a reward.
11. Annual percentage rate (APR)
The annual percentage rate (APR) is the interest rate charged on credit card balances expressed in a standardized, annualized way. This rate is applied each month that an outstanding balance is present.
12. Application
A credit card application is the document a consumer or consumers sign to request a credit card. It typically asks for personal information such as income and Social Security number to help the card issuer decide whether to extend credit and at what rate. Who signs the application is particularly important. If a husband and wife both apply, for example, then both become individually responsible for the entire debt.
13. Application fee
An application fee is often charged on credit cards for people with bad credit. Consumers should make sure to ask how much the fee is and how it is applied. Beware of cards that apply fees to the credit card and eat up most of its credit limit.
14. Approval response
An approval response is an authorization that is received by a merchant when a transaction is approved.
15. Application fraud
Application fraud is a type of banking fraud in which a crook uses your personal information to apply for a credit card or other bank account in your name.
16. Association
A credit card association is a group of card-issuing banks or organizations that set common transaction terms for merchants, issuers and acquirers. Some major associations are Visa, MasterCard, American Express and Discover.
17. ATM (Automated Teller Machine)
An ATM, or automated teller machine, is an interactive terminal with a touch screen or keypad that allows consumers with credit cards or debit cards to withdraw cash, check balances and/or make deposits using the magnetically encoded card to perform transactions. Most ATMs are interconnected via networks, allowing consumers to conduct banking or credit card business anywhere in the world.
18. Authentication
Authentication is the process of assuring that a credit card transaction has been initiated by an authorized user of that card. From the merchant’s point of view, authentication means getting the right information from the consumer, and having it verified by the transaction network. In recent years, authentication has been stepped up by means including security codes on credit cards.
19. Authorization
Authorization is an important concept for both credit cardholders and credit card merchant accounts. Every retailer has a purchase limit above which they must seek authorization from the card issuer before they can complete the sale. Such authorization can be done by telephone or electronically at the cash register. Authorization is used to control credit card fraud.
Authorization is also the first step in processing a credit card. After a merchant swipes the card, the data is submitted to merchant’s bank, called an acquirer, to request authorization for the sale. The acquirer then routes the request to the card-issuing bank, where it is authorized or denied, and the merchant is allowed to process the sale.
20. Authorization code
A code that an issuer or its authorizing processor provides to indicate approval or denial for an authorization request.
21. Authorization date
The authorization date and time is the date and time when a credit card transaction is approved.
22. Authorization only
An authorization only transaction is a transaction that is created to reserve an amount against a credit card’s available limit for intended purchases; an authorization only transaction is intended for a merchant’s protection, to assure that the credit card has a limit high enough to allow a transaction.
23. Authorized transaction
In credit card terminology, an authorized transaction is one that has been approved.
24. Authorized user
An authorized user is any person who has permission to use a credit card account, but is not responsible for paying the bill. Authorized users differ from joint credit, in which both parties are obliged to pay. In some cases, the user will receive a credit card in his or her name, even though it is linked to someone else’s account.
24. Authorized user
In routine credit card transactions, the authorized amount is the approved amount of money to be charged. After transactions are approved, the authorized amount is deducted from the amount of available credit.
26. Automated Clearing House (ACH)
The Automated Clearing House, or ACH, is a network of financial institutions that processes many types of consumer payments, including debit and credit card transactions. Most consumers don’t interact directly with the system, but if you have a direct deposit of your check or make a monthly mortgage payment, you’re likely using the Automated Clearing House transaction network.
27. 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.
28. Available credit
Available credit is the amount that is available to be charged to a credit card amount; the difference between the credit limit and outstanding charges on the account.
29. Average daily balance
Average daily balance is a key number used in the formula that computes how much interest you have to pay on a credit card balance. An average daily balance is determined by adding each day’s balance and then dividing that total by the number of days in the billing cycle.
30. Amortization
Loan payments by equal periodic amounts calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.
31. Amortized Loan
A loan to be repaid, by a series of regular installments of principal and interest, that are equal or nearly equal, without any special balloon payment prior to maturity.
32. Annual Percentage Rate (APR)
A percentage rate that reflects the amount of interest earned or charged.
33. Automated Clearinghouse (ACH)
An electronic funds transfer network that enables direct money transfers between participating bank accounts and lenders.
The lender on the note secured by a deed of trust.
35. Co-Borrower
Any individual who will assume responsibility on the loan, take a title interest in the property and intends to occupy the property as their primary residence.
36. Default
Failure to fulfill a duty or promise as specified in the Promissory Note and/or Deed of Trust.
37. Deferred Payment Loan
A loan which allows the borrower to defer all the monthly principal and interest payments until the maturity date of the promissory note, at which time the outstanding principal loan balance and all accrued interest is due and payable.
38. Downpayment
The difference between the purchase price of real estate and the loan amount. The borrower is responsible for providing the funds for the downpayment.
39. Home Improvement
Repairs and/or additions made to better the status of the permanent structure of the primary residence.
40. Homeowners Association
An organization of homeowners residing within a particular development whose major purpose is to maintain and provide community facilities and services for the common enjoyment of the residents.
41. Interest
Consideration in the form of money paid for the use of money, usually expressed as an annual percentage.
42. Joint Tenancy
Joint ownership by two or more persons giving each tenant equal interest and equal rights in the property, including the right of survivorship.
43. Loan-to-Value (LTV) RatioThe ratio of the principal balance of a mortgage loan to the value of the securing property, as determined by the purchase price or Appraised Value, whichever is less.
44. Mortgagee
A lender or creditor who holds a mortgage or Deed of Trust.
45. Mortgagor
A borrower who is obligated to pay on a mortgage or Deed of Trust.
46. Overall Debt to Income Ratio
The ratio, expressed as a percentage, which results when a borrower’s total monthly debt, including the proposed mortgage principal, interest, taxes & insurance and all recurring monthly debt (such as credit card payment, student loan, mortgage, and auto loan), is divided by the gross monthly income.
47. Primary Residence
A dwelling where one actually lives and is considered as the legal residence for income tax purposes.
48. Principal
The amount of debt, exclusive of interest, remaining on a loan.
49. Principal and Interest to Income Ratio
The ratio, expressed as a percentage, which results when a borrower’s proposed Principal and Interest payment expenses is divided by the gross monthly household income.
50. Processing
The preparation of a loan application and supporting documents for consideration by a lender.
51. Refinancing
The process of paying off an existing loan and establishing a new loan.
52. Renovation
The restoration of the primary residence. Generally, this includes repairs, improvements and additions to the permanent structure of the primary residence.
Title
The evidence of the right to or ownership in property.
53. Trustee
One who holds legal title to a property for the benefit of another, or for the purpose of securing performance of an obligation.
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