Credit Card Glossary D-P

Some credit “terms” that might “interest” you

Debit Card - Payment card that’s linked directly to your bank account. The card takes the purchase price from your account as soon as you use the card to buy something. A signature-based or deferred debit card with a Visa or MasterCard logo removes the money from your account in two or three days.

Debt Consolidation - Replacing several loans with just one loan, usually with a lower monthly payment and longer repayment period.

Equal Credit Opportunity Act  (ECOA) - Federal law which prohibits discrimination in credit transactions on the basis of a person’s race, color, religion, national origin, sex, marital status, age and source of income.

Fair Credit Billing Act  (FCBA) - Passed by Congress in 1975 to help consumers resolve billing disputes with credit card issuers. The act requires issuers to credit payments to a consumer’s account the day they are received.

Fair and Accurate Credit Reporting Act (FACTA) - Federal law that governs what credit bureaus can report and for how long. It requires credit bureaus to supply copies of customer’s credit reports on demand.

Fair Debt Collection Practices Act  (FDCPA) - Federal law which prohibits certain methods of debt collection, such as harassment.

FICO Score - In the U.S., credit ratings are based on this score, which is calculated by a company called Fair Isaac Corporation.

Finance Charge - The cost for using a credit card, consisting of interest costs and other fees.

Fixed (F) - When the letter F appears after the annual percentage rate (APR), the interest rate is fixed and can’t be adjusted.

Floor Rate- The lowest rate that is possible on a variable rate loan or line of credit. On a credit card with the prime rate as its index, the rate on the card may never go lower than the floor rate, no matter how low prime goes.

Grace Period - Interest-free time a lender allows between a transaction date and the billing date. The standard period is usually between 20 and 30 days. If there isn’t a grace period, charges will accrue the moment a purchase is made with a credit card. If you carry a balance on your credit card, there’s no grace period.

Interest - Added money paid when borrowing money. It’s calculated as a percentage of the amount of money borrowed and paid back over a specified time.

Interest Rate - The percentage used to calculate interest charged on a loan.

Interest Rate Cap - The limit on how much a borrower’s percentage rate can increase or decrease at rate adjustment periods and over the life of a loan.

Interest Rate Ceiling - The highest percentage a lender can charge for an adjustable rate mortgage.

Introductory Rate - Low rate charged by a lender for an initial period of time. When the introductory period is over, the rate increases.

Line of Credit - Commitment by a financial institution to lend up to a specific amount of money over a specified period of time.

Merged Credit Report - Combined summary of a person’s credit history from the three largest credit bureaus: Equifax, Experian and TransUnion.

Minimum Payment - The minimum amount a credit card holder must pay on their monthly statement. Most card issuers set a minimum payment of two percent of the outstanding balance.

Monthly Periodic Rate - Interest rate factor used to calculate interest charges on a monthly basis. It equals the yearly rate divided by 12.

National Foundation for Credit Counseling (NFCC) - Nonprofit organization which educates people on using credit wisely. It’s the parent group for Consumer Credit Counseling Service.

National Issuers - The majority of credit cards in the U.S. originate from several national issuers, such as First USA, MBNA and Bank of America. The banks are usually located in states such as Delaware and South Dakota, as these states don’t have any limits on what cardholders can be charged.

Original Principal Balance - The amount of money borrowed.

Over-the-limit fee - Charged for exceeding the credit limit on the card.

Penalty Rate - Several percentage points higher than a credit card's current annual percentage rate. This goes into effect after one or two late payments.

Periodic Rate - Interest rate in relation to a certain amount of time. A monthly periodic rate is the cost of credit per month; the daily rate is the cost of credit per day.

Pre-approved - A pre-approved credit card means a potential customer has passed a preliminary credit screening. It doesn’t mean you will be issued a card.

Previous Balance - Procedure used by some credit card companies where they base finance charges on the amount owed at the end of the previous billing cycle.

Principal - The amount of money owed, excluding interest.

Private Label Card - Issued by a merchant, such as a department store or gasoline company, and features the retailer’s logo. It’s accepted only by the retailer who issued it.