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You can use our glossary
to find the definitions of many terms you will come
across when arranging a secured homeowner loan
Click on a letter A
to Z for terms beginning with that letter
A
ABR (above base rate)
a figure used by some banks to describe
the extra interest they will charge you if you are overdrawn
(e.g if your bank's base rate is 5% and the ABR is 10%
and you are overdrawn then you are being charged 15%
Acquirer
Acquirers are banks which make arrangements
with businesses like shops so that the shops can accept
plastic card payments. When you have pay for something
by card, the money is sent to the acquirer, which puts
it in to the shop's bank account and sends details of
the sale to the card issuer. The card issuer records
the amount of money paid and what you bought on your
monthly bill. The acquirer charges the shop a few pence
for handling debit card transactions and a small percentage
for credit cards. Acquirers in the UK are Royal Bank
of Scotland, Clydesdale Bank, Bank of Scotland, NatWest
Streamline, Midland Bank, Barclays Merchant Services,
Lloyds TSB and Girobank Merchant Services.
Additional cardholder
One credit card account can sometimes
have two (or more) credit cards issued on it. Every
month the person who opened the account (called the
main cardholder) is sent a bill. The bill lists all
of the things bought by both the main cardholder and
the additional cardholder(s). The main cardholder is
responsible for paying the bill, whoever made the purchases.
Affinity Card
these are the same as standard cards,
however a small percentage of what you spend is donated
to charity
Annual fee
some issuers charge you a fee every
year to use a credit card. This helps to pay for some
of the fixed costs of running a credit card account,
such as sending out statements every month.
APR (annual percentage rate)
this is the amount of interest you will be expected
to pay, should you borrow on your credit card. The APR
is a figure designed to give consumers some idea of
the cost of borrowing on the credit card. Other factors
such as the date from which the interest is charged
and the number of days you have to pay the interest
also affect the cost of borrowing.
ATM (automated teller machine)
allow you to access cash with a credit
card or other card associated with your bank account.
You need to enter your personal identification number
(PIN) into the machine to access cash.
Authorisation
every retailer has a purchase limit
above which they must seek authorisation from the card
issuer before they can complete the sale. This can be
done by telephone or electronically at the cash till.
Authorisation is used to control credit card fraud.
Average daily balance
the average daily balance is a common
way for card issuers to calculate finance charges. The
card company finds the balance each day of the billing
period, adds the daily balances together and divides
by the number of days in the period. The calculation
includes new purchases and payments.
B
Bad credit
a term used to describe a poor credit
rating. Common practices that can damage a credit rating
include making late payments, skipping payments, exceeding
card limits or declaring bankruptcy. "Bad Credit"
can result in being denied credit.
Balance transers
moving a balance (debt) from one credit
card to another. The usual reason is to shift an ongoing
debt to an account with a lower interest rate.
Banking code of practice
the Code lays down the minimum standards
of service that you can expect from your bank or building
society
Banking Ombudsman
an independent arbitrator who will
assess any complaint you have about your bank, providing
you have exhausted the bank's own complaints procedure
first. Any decision made by the Ombudsman is binding
on the 60 banks that belong to the scheme but you do
not have to accept his decision and can continue your
case in a Court of Law. The Banking Ombudsman: 70 Gray's
Inn Road, London WC1X 8NB. Enquiries: Local telephone
0345 660902.
Base rate
This is the interest rate set by the
Bank of England which influences how much we pay to
borrow money and the interest we earn on our savings.
Billing cycle
the frequency with which you receive
a statement (usually every month)
Bounced cheque
he term for cheques which the bank
refuses to honour. Your bank will bounce one of your
cheques if you do not have enough money in your account
to cover the payment, or have not agreed an overdraft.
Every time a cheque is bounced, your bank may charge
you between £25 and £30.
Business credit card
these credit cards are generally issued
to corporate executives or business owners so that they
can keep business expenses separate from personal charges
more easily.
C
Cardholder
Cash advance
you can use your card at a bank or
an automatic teller machine to get a cash loan. The
interest rate for a cash advance is typically higher
than it is for purchases, and there is usually no grace
period. There can also be a handling fee for withdrawing
cash in addition to the interest charges, which can
raise the cost significantly.
Cash back
returns to you a percentage of the
total amount spent on your credit card over a specific
period of time, usually monthly or quarterly. This is
particularly useful if you normally pay your credit
card bills in full each month, as it means you get an
effective discount on the products bought with your
credit card.
Charge card
one major difference between credit
card and charge card is that charge card must be paid
in full every month. An example of a charge card is
American Express card.
Churning
a term used by service providers such
as telecommunications or credit card companies for the
percentage of customers who leave in any period to use
the services of a rival company.
Co-branded card
a co-branded credit card is sponsored
by both the issuing bank and a retail organization such
as a department store or an airline. Cardholders may
get benefits such as discounts or free merchandise from
the sponsoring merchant based on account usage and terms.
Credit bureau
an agency that keeps your credit record.
Credit card
a plastic card which lets you pay for
goods and services now but does not take the money out
of your bank account straight away. With a credit card
you are given a spending limit and at the end of every
month have the option of either paying off the full
balance or a minimum percentage set by the bank, usually
3% to 5%. You will be charged interest on any amount
you do not repay.
Credit history
a partial profile of your financial
life given within a particular time frame (usually measured
in years). It shows the extent to which you pay your
bills on time and how much you may owe particular parties.
Credit insurance
a policy that pays off the card debt
should the borrower lose his job, die or become disabled.
Credit limit
the maximum amount of charges you may
incur on your card, which is determined by the issuer
after examining your income, the amount of your current
debt and your credit history.
Credit reference agency
a company which collects information
on your credit history and supplies it to banks and
building societies when you apply for a credit card,
personal loan or mortgage. You have the right to look
at what information these agencies hold about you, usually
for a small fee.
Credit report
a document that lists your credit history,
created and updated using information from banks, merchants
and other creditors.
D
Daily periodic rate
the interest rate factor used to calculate
interest charges on a daily basis. Rarely used, this
method of computing interest can result in an effective
annual percentage rate which is approximately 2% greater
than the yearly stated rate of interest.
Debit
a charge to a customer's bankcard account.
A transaction, such as a check, automated teller machine
(ATM) withdrawal, or point-of-sale (POS) debit purchase
that transfers money from one account to another.
Direct Debit
this is an agreement made between you
and a company. It gives the firm permission to take
money out of your bank account on a regular basis to
pay for goods or services, such as electricity. Because
direct debits are cheaper for companies to handle than
regular payments by cheque, companies will often give
you a discount if you agree to make payments in this
way.
E
EAR (effective annual rate)
the amount of interest you are charged
each year by your bank or building society for an overdraft
or personal loan. Unlike the annual percentage rate
(apr), the EAR does not include charges and fees and
is therefore not a true reflection of the total cost
of your credit facility
Extended credit
this means you can spend as you wish
provided you stay within the credit limit agreed with
their issuer and pay back as much as you want provided
you pay the minimum.
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