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Annual Percentage Rate (APR) - The real annual cost of a
loan, such as a credit card bill, which includes fees, charges and
interest. This can be higher than the interest-only rate.
Balance - Two definitions:
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The amount of money in an account
after all debits and credits have been deducted or added
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The remaining debt on a loan
Balance transfer -
Moving all funds from one account to another, often referring to an
outstanding credit card loan moved from one card account to another.
Balance transfer fee - A charge for moving a balance or
loan to another provider.
Cardholder agreement - Terms and conditions agreed
between cardholder and card issuer.
Cash advance fee - A charge for withdrawing cash when
using a credit card.
Collateral - Guarantee for a loan. This usually takes the
form of property, stocks and shares or insurance policies.
Compound interest - Interest earned on interest. For
example, if you invest 100 which earns ten percent compound interest each
year, you earn ten percent in year one. This gives you a total of 110. In
year two, you earn ten percent on 110, which equals 11 giving you a
total of 121.
Similarly, compound interest is the interest that is regularly added to a
loan. If you borrow 100 at a compound interest of ten percent each year,
you will owe an extra 10 in year one. This takes your debt up to 110. In
year two, you will own ten percent of 110, which equals 11 taking your
loan total to 121.
Credit history - A statement of a person or companys
financial history, including income, outstanding debts or financial
commitments and any court debt judgments.
Credit insurance - Insurance that pays any outstanding
credit balance in the event of difficulty such as the loss of a job,
illness, disability or death. The amount paid is usually either the
minimum repayment plus interest each month or the full amount outstanding.
Credit limit - The total amount a customer can spend on a
credit card at any one time.
Credit rating/ credit score - A rating applied to an
individual or company, showing how much of a lending risk he, she or it
represents
Debit card - A card used to withdraw funds directly from
a current account, either at retailers and other outlets or from a cash
machine.
Interest - A charge for a loan, usually a percentage of
the total amount. The rate of interest is the charge made for a stated
period. For example, an annual rate of interest of 15 per cent means that
for every 100 borrowed for one year, the charge is 15 (excluding any
fees). See also Annual Percentage Rate.
Introductory rate - A special rate of interest charged
for a specified period at the opening of a savings or loan account. This
can be a higher rate to boost a savings account or a lower rate on a loan.
Late payment fee - A charge made for late repayment of
any form of loan.
Minimum payment - The smallest proportion of a credit
card loan that can be paid in one installment. Usually expressed as the
higher of a fixed amount or a percentage of the outstanding debt.
Overdraft - A facility that can be made available to
current account holders that enables them to spend up to a specified
amount above their account balance. Interest may be charged if this loan
facility is used.
Variable rate - A rate of interest that rises or falls in
line with the base rate of interest set by a national or central bank.
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