About a week ago, the
Xangapedia got a lot of hits on Xanga, so we thought we'd make our own list of useful credit card terms. Enjoy!
APR: The APR, or annual percentage rate, is the interest rate credit cards charge on your borrowed money. Comparing APR's is a good way to compare the deals offered by different providers.
Charge-off: Credit card companies charge-off accounts after about six months of missed or insufficient payments. This is not an additional fee, but rather a declaration that your creditor is losing money on your account. This allows the company to recoup some of the loss in its taxes, but the charge-off also shows up on your credit report for seven years. And you're still required to pay off your credit balance. After you settle the debt, your credit report will include a "Charge-Off Paid" label for the remainder of the seven years, unless you can get your creditor to agree to wipe it from your report.
Credit Report: Your credit report contains all of your credit history, information that is compiled by a credit bureau. Credit card providers and lenders will consider your credit report when trying to determine your financial reliability. Your report also includes your name, addresses (past and present), and employers (also past and present). Late payments that happened seven or more years ago will not appear on your credit report, nor will bankruptcies more than ten years old. Your credit score, however, is not on your credit report—you have to access it separately.
Default: Anytime you fail to pay back a loan, that's defaulting—for example, missing a monthly payment on your credit card or paying below the minimum. As a result, your creditor might increase your interest to a default or penalty rate. Default rates are the maximum interest rates companies can charge and tend to start at 30%.
Fixed Interest Rate: Despite the name, fixed interest rates can be adjusted by creditors, as regulated by the federal government. Currently, credit providers must give customers a 45-day warning before increasing a fixed interest rate, and cardholders have the option to repay their debts at the old rate. After February 22, 2010, creditors will be unable to raise fixed interest rates during a cardholder's first year holding an account except under specific circumstances—for example, if the cardholder is over 60 days behind on a payment.
Maxing-Out/Over-the-Limit: Every credit card has credit limit, and it best to stay well below it—experts recommend owing a maximum of 10% of your limit. 30% of your credit score is determined by the ratio of your card balances to card limits, called credit utilization. When you exceed your credit limit it's called maxing out, which means your creditor will charge you monthly over-limit fees until you reduce your balance, and it might even entitle your provider to apply a default interest rate.
Piggybacking: If you're designated an authorized user on someone else's credit account (for example, your parents') it means all of the credit history for that account will show up on your credit score. This can be good or bad, depending on whether the account is in good standing or full of late payments. Piggybacking is sometimes abused by people interested in faking better credit scores—they pay a fee to be made an authorized user on someone else's account.
Variable Interest Rate: If you choose a credit card with a variable interest rate, it is connected to another interest rate, usually the Prime Rate (the interest rate major banks offer their most qualified customers). You also have a set margin—for example, if your margin is 10% and the Prime is 3%, your interest rate will be set at 13%. The Prime can change at any time, but your margin works like a fixed interest rate; your creditor must notify you 45 days in advance if they are planning an increase, and you can opt out.
Were you familiar with these terms? Are there any financial words—credit-related or otherwise—that you would like us to define?Image Source
Comments (7)
Useful, if not quite the same in terms of raw excitement value.
Im fairly certain that the information you gave for piggy backing isnt quite correct. An
authorized useron an account is simply someone who has a card so they can access the credit line. They have
no responsibility what-so-everfor paying back that debt. The credit card company only has their name. There is no other information so that the activity on the account can affect their credit history.
I think what you mean in this definition is a joint owner on the credit card account. You can (usually) add another responsible party to the credit card account. That person then has the credit card, but is also responsible for all debt incurred. This person would then have the credit card history (whether positively or negatively) affect their credit score.
This is something to watch out for any time you have someone else added onto your account! If it is a boyfriend or a girlfriend that then goes their own way, it could be bad if they are simply an authorized user. If it is a husband or wife, you also want to make sure they are a joint owner so that both of you can have great credit scores!
@der_lila_Stern@xanga - Well, the website I looked at for definitions said the info will show up on your credit report even if you're just an authorized user. Though I do agree there's a difference between being an authorized user and joint account holder—the latter is legally obligated to pay the bill.
@sarah - I wonder if it depends on the individual credit card company. My husband was an authorized user on some of the credit cards before I learned about the difference - and it didnt show up on his credit report until after he was a joint owner.
@der_lila_Stern@xanga - that's probably true. also it's possible some card companies have pushed for credit info not to show up on authorized users' reports because of scams.
@sarah - It just doesnt even make sense to me that an authorized user would get that on their credit report, since it isnt them that is actually responsible! Definitely something interesting and worth paying attention to though!
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