Glossary

Credit Intel's glossary contains definitions of commonly used terms and phrases to help you navigate the world of personal finance.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z #

Accrued Interest

Accrued interest is the amount of interest charged, but not yet paid, that accumulates between loan payments.

Active Management

When actively managed, an investment fund uses professional managers in an attempt to “beat the market” – in other words, return greater profit to the fund’s shareholders than the market in general, or whichever segment of the market the fund operates in.

Adjusted Gross Income

Your adjusted gross income is your gross income minus certain tax adjustments that effectively lower your taxable income and increase your chances of qualifying for certain tax breaks.

What is Adjusted Gross Income?

Airline Miles Credit Card

A type of rewards credit card that is created by an airline in partnership with a credit card issuer. It typically provides the greatest benefits for spending with that airline and its alliance partners.

Alternative Data

Non-debt-related information that may be analyzed to help lenders and other organizations assess a person’s creditworthiness. It typically includes payments data, such as rent, utility, and cell phone payments. It can also extend beyond information with an obvious financial link.

Amortizing Loan

An amortizing loan is one you pay back in equal periodic payments (usually monthly), with a portion of each payment being applied to that period’s interest charge, while the remainder reduces the balanced still owed. Mortgages, auto loans, and personal loans are examples of amortizing loans. An “amortization schedule” is a table showing the amount of each periodic payment that goes toward interest and principal over the life of the loan.

What Is Capitalized Interest?

Annual Effective Rate (AER)

Another term for annual percentage yield (APY).

The Differences Between APR, APY, and Interest Rates

Annual Percentage Rate (APR)

A measure of all the costs of a loan or credit card, including the stated interest rate plus any additional fees. Comparing APRs can help you make apples-to-apples comparisons among credit products from different sources.

Annual Percentage Yield (APY)

The total amount of interest you pay on a loan or earn on a deposit account, over one year. It includes the nominal interest rate and the effect of compounding.

Authorized User

An additional member on your credit card account. They receive their own card with their own name on it, but aren’t legally responsible for the credit card bill. Authorized users are typically spouses or other relatives but, technically, could be anyone.

Average Daily Balance (ADB)

The sum of each day’s balance owed on a credit card, divided by the number of days in the billing cycle. The more activity on a credit card the more complex this calculation is.

Balance Transfer Credit Card

A credit card with a low or zero introductory APR to make it easier and less costly for users to transfer and pay off balances from other credit cards. Balance transfer credit cards typically charge a transfer fee of 3% or more of the balance being transferred.

Bill Payment Service

A bill payment service is a third party that facilitates payment from an individual’s or enterprise’s account (e.g., checking or credit card) to a vendor or service provider, for a fee.

Billing Period

The time frame during which current transactions, prior balances, payments, and credits are added together to generate your monthly billing statement. Your account’s billing period starts or “opens” on the day after your previous billing period ended or “closed,” and continues until the day before the next billing period begins. The billing period is typically 30 days long.

Billing Statement

A document generated on each monthly billing period’s closing date. Your billing statement provides a record of all transactions made during the billing period, as well as interest and any other fees that have been charged. Your statement also includes your account balance, your credit limit, minimum payment due, and your payment due date.

Brokerage Account

A brokerage account is an account that you open with a broker in order to buy, sell, or hold investment securities. Brokers are intermediaries between the typical investor and the many different securities exchanges on which investment assets are traded. Only members of an exchange are allowed to trade on it, so investors wishing to trade on a given exchange must open a brokerage account with a broker who is a member. Most brokerage accounts allow you to buy, sell, and hold many different investment assets, including individual company stocks, bonds, mutual funds, ETFs, etc. In addition, some allow trading “derivatives,” such as different types of “options,” which are contracts to buy or sell securities, currencies, or other assets at a predetermined price on a specific future date.

Business Credit Card

A credit card designed for business owners and employees, often with business-focused rewards programs. Business cards may be charge cards or standard credit cards.

Types of Credit Cards: Understanding the Differences

Cash Advance

Using your credit card to obtain cash, such as through an ATM. All cash withdrawn must be paid back, usually with an added fee and accrued interest based on a different APR than the card’s APR for purchases.

Cash Back

Cash back is a credit card rewards benefit that refunds to the card member a small percentage of each purchase made with the card, usually as a statement credit. There are generally three tiers of cash back credit cards: flat-rate cash back cards offer the same percentage back on every purchase; tiered cash back cards offer a higher cash back percentage in certain spending categories like groceries or gas, and a lower rate on all other purchases; and rotating bonus cards, with which the spending categories that earn higher cash back percentages change periodically.

Cash-Out Refinancing

A cash-out home loan refinancing is about raising cash. It involves replacing your existing mortgage with a new one whose amount is higher than what you owe on your current home loan, providing you with cash for other expenses and investments.

Guidelines for When and How to Refinance a Home Loan

Cash Stuffing

Also known as the envelope budgeting method, cash stuffing is a low-tech, hands-on way to control spending. Separate monthly expenses into categories, with an envelope labeled for each category. Every payday, a budgeted amount of cash goes into each envelope, and purchases are made using the cash in their respective envelopes.

What Is Cash Stuffing?

Charge Card

A credit card with either no credit limit or a much higher limit than standard credit cards, but users must pay the balance in full each month. Charge cards do not charge interest for on-time payments but late payments can incur substantial fees.

Charge-off

A negative account status which means that the credit grantor has written off the debt because they believe it is unlikely that it will be collected. You are still legally responsible for the balance owed. A charged off status will have further negative impacts to your credit report and score.

Child Tax Credit

A $2,000 per child reduction in your federal taxes for raising children. It phases out based on income, but the threshold level is high. For married couples, it starts phasing out above $400,000. Part of the child tax credit is refundable, meaning that you may get money from the IRS even if you pay no taxes.

Childcare Tax Credit

A reduction in the federal tax bill of working parents and guardians caring for children or other dependents who can’t provide self-care. Up to $3,000 in expenses can be claimed for one child, or up to $6,000 for two or more. The percentage of those expenses you can get as a tax credit varies from a maximum of 35% to a minimum of 20%, depending on your income, but there is no maximum income level that would eliminate you from using this tax credit. The childcare tax credit is nonrefundable at the federal level, but could be at least partially refundable on certain state tax returns.

Closed Loop Gift Card

Can be used only at the store or brand issuing them—as opposed to open loop gift cards, which can be used virtually anywhere. Closed loop gift cards usually can be purchased without a fee from the issuing brand.

Closing Date

The day your billing period ends and your monthly billing statement is generated. Every month, American Express reports your relevant credit information to the consumer credit bureaus on your statement closing date.

Collateral

An asset you offer a lender to secure a loan. If the borrower defaults on the loan, the lender is entitled to seize the collateral in repayment. Common types of collateral include homes for mortgages and cars for auto loans.

Community Investing

A method of socially responsible investment that aims to help fund Community Development Financial Institutions in the U.S., usually in order to help assist low income and underserved communities.

A Guide to Socially Responsible Investing

Compound Interest

This method of calculating interest accrues interest at various frequencies, escalating interest earnings. Used for an investment, you earn more; for a debt, it costs you more.

Continuous Interest

An extreme form of compound interest whereby the frequency of compounding is considered infinite, used mostly in the world of financial derivatives.

What is Compound Interest & How is it Calculated?

Cosigner

A person who, along with the primary applicant, signs a credit card or loan application. The cosigner agrees to guarantee payment if the primary applicant is unable to repay the debt. The cosigner assumes legal responsibility for the debt.

Credit Card

A payment card that offers users “mini-loans” to purchase goods and services, or to obtain cash, typically with monthly payback cycles. Users aren’t required to pay their balance in full each month, but when they don’t, they begin accruing interest on any unpaid purchase balance. Cash withdrawals typically accrue interest right away. A minimum payment is usually required each billing cycle.

Credit Card Annual Fee

A fee you’ll pay just for having certain credit cards. Though there are "no-annual-fee" credit cards available, most experts agree it makes sense to compare how you intend to use a card with the perks and benefits it offers, then “do the math” to determine whether paying the fee makes sense for you.

Credit Card Outstanding Balance

The total amount of money you owe to your credit card company at any given moment. It changes with every purchase and payment.

Credit Card Statement

A printed or online summary of the credit card transactions you made during a billing period, usually monthly. It includes information such as purchases, fees, interest charges, payments, refund credits, and a total statement balance due.

Credit Card Statement Balance

The amount you owe the credit card company on purchases, cash advances, and other transactions made with your credit card for a given period, usually a month. This will change from billing period to billing period, unlike your outstanding balance, which changes with every transaction.

Credit Counseling Agency

A non-profit organization with counselors trained in debt management, budgeting, and consumer credit. They offer financial advice and can help get consumers out of debt through debt management programs.

What are Debt Management Programs and How Do They Work?

Credit Freeze

A free government-regulated function that prevents a credit reporting agency from releasing your credit report to anyone except existing creditors or a government agency with a court order, a subpoena, or a search warrant. You must freeze your credit with each credit bureau individually.

Credit Limit

The maximum amount of money you can owe to your credit card company at any given time.

Credit Lock

An unregulated private service provided by credit bureaus and some independent providers that may carry a fee. It lets you quickly approve or deny access when a potential lender requests your credit report.

Credit Report

A detailed, objective summary of your loans, credit cards, and other types of debt. Credit reports include account information such as payment history, account balances, and account age. Credit scoring models, like FICO^® and VantageScore^® credit score by TransUnion^®, use information from your credit report to calculate your credit score.

Credit Reporting Agencies

Also known as credit bureaus, these agencies collect data from multiple sources to assess your creditworthiness—basically, whether you tend to pay what you owe. They then sell their credit reports to companies you want to do business with.

Credit Score

A three-digit number that’s calculated based on information that appears in your credit report, such as payment history and total debt owed. Your credit score is used to predict your creditworthiness. FICO^® and VantageScore^® credit score by TransUnion^® are the two primary credit scoring models in the U.S.

Credit Utilization Rate

The ratio of your outstanding credit card balances to your credit card limits. It measures the percent of available credit you are using. Credit rating bureaus reward lower credit utilization rates with higher credit scores, and 30% or less is considered good.

Creditworthiness

The likelihood an individual will repay their debts. Creditworthiness is determined by your credit history and is used by creditors to assess whether or not to extend credit. Higher creditworthiness means a person is seen as low risk and therefore may be able to get more favorable loan/credit terms. Low creditworthiness may result in higher interest rates or being denied credit. Generally, the higher your credit score, the more creditworthy you are.

Daily Periodic Rate (DPR)

A credit card’s APR divided by 360 or 365 days. DPR is applied to average daily balances as part of credit card interest charge calculations.

Debit Card

A payment card that lets users electronically transfer money directly from their bank account to make a purchase or to obtain cash.

Debt Avalanche

A debt repayment strategy that targets paying off debts from highest to lowest interest, regardless of loan size.

Debt Consolidation

Rolling up several credit card balances, outstanding loans, and other debts into one, bigger loan with a single, lower monthly payment.

Debt Free Living

Purists define debt free living as achieving and maintaining zero debt, in the interest of saving money and enjoying financial independence. Pragmatists keep some kinds of debt, such as mortgages, out of their equation for debt free living.

What is Debt Free Living?

Debt Management Program

Agreed-upon plans between a creditor, debtor, and third-party non-profit credit counseling agency to help the debtor reduce their outstanding, unsecured debt, typically over a payoff period of about five years.

What are Debt Management Programs and How Do They Work?

Debt Relief Services

Agencies that act on your behalf to renegotiate, settle, or change the terms of debt with your creditor(s), often for a large fee. The U.S. Consumer Financial Protection Bureau considers dealing with debt relief (or debt settlement) companies as risky, and suggests working with nonprofit credit counselors or directly negotiating with your creditors.

Are Debt Relief Programs Too Good to be True?

Debt Settlement

A debt reduction method in which the credit issuer allows a consumer to pay off their debt for less than the original balance owed, typically in the form of a lump-sum.

What is Debt Settlement and How Does it Work?

Debt Snowball

A debt repayment strategy that targets paying off debt from smallest to largest, regardless of interest rate.

Debt Snowflaking

A debt repayment strategy that involves putting any extra sums of money toward debt repayment.

Debt-to-Income Ratio

Also known as DTI, debt-to-income ratio is a financial metric that shows the percentage of your monthly income that is used to pay debts – and reveals what percentage is available to pay any future debt. The formula is simply (DTI = Monthly Debt Payments/Gross Monthly Income). Finance experts also view debt-to-income as a measure of your overall financial health. The lower your debt-to-income ratio, the better.

Default

The failure to repay a debt, be it an installment loan or revolving debt. A default occurs when the borrower is unable to make timely payments for an extended period of time – after a loan has already been delinquent. Defaulting on a debt can negatively affect your credit score and make it harder to take on more credit in the future. How long it takes for a loan to default can depend on the loan type and lender.

Delinquency

When a debt payment is in arrears. In other words, a payment is owed and is past due. Delinquency typically occurs as soon as someone misses a payment on a debt, but it often won’t hurt your credit score until the account is delinquent for at least 30 days. An account that stays delinquent for an extended period of time will end up in default.

Disposition fee

Sometimes referred to as a turn-in fee, a disposition fee covers the cost of returning a car at the end of a lease. More specifically, this fee covers any costs associated with cleaning, repurposing, or refurbishing the car so it can later be sold or leased to another individual.

Diversification

An investment strategy that calls for including many different types of securities within a portfolio in order to limit exposure to the risks associated with any single security.

Dividends

Money corporations regularly pay to shareholders, often quarterly. Dividends are usually expressed as a percentage of the value of one share of company stock.

Dollar-cost Averaging

A strategy to increase capital appreciation and reduce the effects of market volatility when investing in stocks, mutual funds, or ETFs. Dollar-cost averaging is done by regularly buying the same stocks over time, such as buying $100 of the same stock every week, instead of making a large lump sum investment.

How Does Investing Work?

Down Payment

The amount of money paid by a buyer at the time of purchase, most often when buying a house or a car. With a car, it can take the form of a cash payment, a trade-in, or a combination of the two. The difference between the down payment and the price of the car is the amount that the buyer needs to finance through a loan.

Early Retirement

The modern view of early retirement is broad and fluid. Some people look to retire as early as 30- or 40-something. And they may “retire” in name only, actually embarking on a second career. To many other people, it means an end to work in their early to mid-60s, which is when Social Security benefits can begin (age 62, at a discounted level from “full retirement age”), as well as Medicare benefits (age 65). The full retirement age is gradually being extended by the Social Security Administration to 67, for those born in 1960 or later.

Earned Income Tax Credit

The earned income tax credit helps low- and lower-middle-income workers and their families get a tax break or a refund. In tax year 2019, you could get up to $6,557. Even if your earnings are so low that you owe little or no taxes, you could get money “back” from the IRS that you never paid into the system—akin to a grant—because of the way this “refundable” credit works. The earned income tax credit phases out completely for taxpayers with adjusted gross income (AGI) of approximately $56,000 or more. State and local credits are also available in some parts of the country.

Effective Annual Rate (EAR)

Another term for annual percentage yield (APY).

The Differences Between APR, APY, and Interest Rates

Electric Vehicle Tax Credit

Officially called the Plug-In Electric Drive Vehicle Tax Credit, this aims to encourage Americans to buy electric cars by refunding up to $7,500 in income tax. There has been confusion over whether the EV tax credit is still available, but as of January 2020 only two car makers had begun to phase out—leaving many qualifying cars still on the market.

Escrow

A financial agreement in which a neutral third party holds money or assets before a transaction is finalized. For example, if a homeowner lumps their property tax payments into their monthly mortgage payments, the lender will hold the tax payments in escrow until property tax payments are due.

A Simple Guide to Mortgage Payments

ESG Funds

A type of socially responsible investment portfolio composed of stocks and/or bonds from companies that have met certain environmental, social, and governance (ESG) standards.

A Guide to Socially Responsible Investing

Exact Interest

A calculation of the daily periodic interest rate typically used in credit card interest formulas that uses 365 days per year.

How to Calculate Interest Rates

Exchange-Traded Fund (ETF)

A basket of investment securities that trade on an exchange, just like a stock. In general, ETFs are passively managed and can be set up to match of large, general market indexes, narrow specialized subsegments, or most anything in between.

Expense Ratio

In mutual funds, the expense ratio is the fee charged to an investor for managing the fund, expressed as a percentage of fund assets.

Federal Deposit Insurance Corporation (FDIC)

The FDIC is a U.S. government agency that aims to maintain public confidence in the country’s financial system. Notably, the FDIC protects individuals from losing deposits of up to $250,000 per account, per ownership category, per financial institution, should that institution fail. Ownership category refers to whether an account is in your name only, jointly held, held for a minor, or owned by a trust, etc.

Money Market vs Savings Accounts: What You Need to Know

Federal Trade Commission (FTC)

A U.S. government agency that aims to protect consumers by preventing deceptive, unfair, and anticompetitive business practices. Through advocacy and educational tools, the FTC also aims to help consumers make informed financial decisions.

Fiduciary Standards

Fiduciary standards refers to the code of conduct requiring that financial advisors put their client’s interests above their own. Fiduciary standards are regulated by the Securities and Exchange Commission (SEC) and by state securities regulators.

Finance Charge

The sum of all fees associated with using credit, to be paid to the credit card issuer or lender. Finance charges include interest, foreign transaction fees, annual fees, and any other credit-related fee.

What is a Finance Charge on a Credit Card?

Financial Planning

A process by which you develop a savings and investment plan to help you achieve your goals in life. It requires building statements of income, expenses, assets and liabilities, and generally starts by assessing your net worth and personal cash flow. Some aspects of the financial planning process can be emotionally difficult—like figuring out what your life goals really are. Some require making choices about future uncertainties.

Financial Planner

A financial planner helps clients with planning retirement, managing taxes, choosing insurance, setting up their estates, and meeting other financial objectives, often working for fixed hourly or project-based fees. They may or may not also act as investment advisors. The Certified Financial Planner Board of Standards’ website is a hub of information about financial planners.

FIRE Movement

FIRE stands for Financial Independence Retire Early, and members of this informal movement begin looking to retire—or at least engage in alternative workstyles and passion projects—as early as their 30s and 40s.

The Hard Truth About How to Retire Early

Fixed Interest Rate

In the context of debt, fixed interest rates are those that stay the same for the entire life of a loan or other form of credit. Similarly, when discussing savings and investing, fixed interest rates stay the same over the lifetime of an investment.

Can I Refinance My Student Loan?

Forbearance

In finance, forbearance is an agreement between a borrower and lender to delay one or more payments. More generally, forbearance is refraining from exercising some legal right; dictionaries define the word as patience and restraint.

What Is Capitalized Interest?

Foreign Transaction Fees

A fee for making a purchase in a foreign currency. Not all cards have foreign transaction fees.

Fraud Alert

A free government-regulated function that allows creditors to get a copy of your credit report only if they take steps to verify that you are really the person making the credit request.

Gas Credit Card

A credit card that provides discounts, cash rebates or other rewards towards gas purchases. Gas credit cards are usually associated with one brand of gas and are co-branded with a credit card network.

Grace Period

The period between the end of a billing cycle and the date your payment is due. You usually aren’t charged interest during the grace period, as long as you pay your statement balance in full, on time, each month.

Everything You Need to Know to Get Your First Credit Card

Guaranteed Approval

Generally for people with poor credit such as first time or subprime borrowers, guaranteed approval credit cards are “guaranteed” because they don’t require a credit check. They include secured credit cards, for example, which require a cash deposit. Your application may still be declined if you don’t meet certain basic criteria, such as having a valid bank account.

How to Get an Instant Approval Credit Card—and Use it Instantly!

Health Care Tax Credit

Also known as the premium tax credit, the health care tax credit is a refundable credit designed to help eligible individuals and families with low to lower-middle income afford insurance purchased on public health insurance marketplaces.

Home Equity

The portion of a home’s value actually owned by the homeowner. It’s calculated as the property’s current market value minus any mortgage balance, other loan balances for which the property was used as collateral, and any liens on the property.

Hotel Credit Card

A type of rewards credit card that is created by a hotel company in partnership with a credit card issuer. It typically provides the greatest benefits for spending with, and staying at, that hotel company’s properties.

Identity Theft

Using another person's private identifying information for financial gain. Identity thieves can open new credit card accounts in your name, for example, or file false tax returns for large refunds. They have been known to file false requests to stop your mail delivery in order to intercept documents.

Impact Investing

A socially responsible investment strategy that focuses on generating positive, measurable social and environmental impact even if earnings are less than market rate. In other words, impact investing measures success on more than only financial returns.

A Guide to Socially Responsible Investing

Inheritance Tax

A half-dozen states impose an inheritance tax on inherited money and property, but there is no such tax in the rest of the states. Nor is there a federal inheritance tax. Where inheritance tax applies, it kicks in at different asset levels at rates that vary, depending on the state, your relationship with the deceased, and other factors.

Installment Loan

The borrower is loaned a lump sum that is then paid off in regular monthly payments at a fixed interest rate. By comparison, revolving loans generally have a principal balance that varies and carries forward from month to month, and monthly payments can fluctuate due to purchasing levels and variable interest rates.

Should You Take Out a Personal Loan to Pay Off Credit Card Debt?

Instant Approval

A process in which a credit card application is evaluated and a decision made in real time. Instant approval is typically done with an online application. Despite the “approval” in the term, it’s always possible that your application will be “instantly” declined.

How to Get an Instant Approval Credit Card—and Use it Instantly!

Insurance Premium

A premium is the price you pay to transfer a risk to an insurance company. The term applies to the price of all forms of insurance, including life insurance, auto, homeowners, boaters, etc.

Interest

The amount of money a lender charges a borrower for a set amount of money (the principal), usually expressed as an annual percentage of the principal.

Investment Advisor

Investment advisors focus on helping clients handle their investment portfolios of stocks and bonds, usually charging a percentage of the assets under management. They may also provide other services associated with financial planning, such as tax advice. Background information on investment advisors and their firms is easily accessed on the Securities and Exchange Commission’s Investment Advisor Public Disclosure website.

What Do Financial Advisors Do & How Much Do They Cost?

Large Cap Stock

Shares of corporations that have a total market value (aka, market capitalization or “market cap”) of $10 billion or more.

Mutual Funds vs ETFs: What You Need to Know

Late Payment

A bill payment made after the due date. Late payments may incur a fee.

Large Cap Stock

Shares of corporations that have a total market value (aka, market capitalization or “market cap”) of $10 billion or more.

Limit Order

An order to automatically buy or sell a security at certain price or better, in order to take advantage of an anticipated market swing. Buy limit orders can take place only at the limit price or lower, while a sell limit order must be at the limit price or higher.

Limited-Purpose/Store Credit Cards

Credit cards that can only be used at specific locations, like a particular gas station or retail store brand. Otherwise, they typically operate like standard credit cards and may provide discounts or rewards points.

Liquid Asset

An investment asset that can be easily converted into cash in a short amount of time.

Mutual Funds vs ETFs: What You Need to Know

Loan Term

The length of a loan, typically given in months or years. For cars, some common loan terms are 36 months, 48 months, and 60 months; for home loans, the most common term is 30 years, though 15- and 20-year terms are also available.

What Is Car Finance and How Does It Work?

Market Index

A hypothetical portfolio of investments that represents a segment of the financial markets. The value of the index is calculated based on the prices of its underlying holdings.

Minimum Payment

The smallest payment amount required each month, by your payment due date, to keep your account in good standing. Your minimum payment due appears on your monthly statement and includes any past due amounts, as well as applicable interest and fees. Note that a monthly payment that is less than your minimum payment due counts as a missed payment.

Modified Adjusted Gross Income

A key factor when filing your taxes, for purposes like qualifying for a Roth IRA or getting a government-subsidized health insurance plan, modified adjusted gross income is your adjusted gross with certain items added back in.

What is Modified Adjusted Gross Income?

Money Order

A printed order for payment of a specified sum, issued by a bank, the U.S. Postal Service, or certain retailers.

Why You Shouldn’t Buy a Money Order with a Credit Card

Money Management

A process of budgeting, saving, investing, spending, or otherwise overseeing the funds available to an individual or group.

Mutual Fund

A financial vehicle that pools money from many investors to invest in holdings like stocks, bonds, and money markets. Mutual funds are often actively managed, and can be set up to match or beat the performance of large, general market indexes, narrow specialized subsegments, or most anything in between.

Negative Screening

An approach to socially responsible investing in which investors exclude industry categories they deem unappealing. Negative screening tends to be highly personal, and investors often choose to exclude companies in industries like alcohol, tobacco, firearms, gambling, animal cruelty, etc.

A Guide to Socially Responsible Investing

Net Asset Value (NAV)

Typically used in connection with mutual fund share prices, the net asset value is used to determine the fund’s share price. It is the total value of the fund’s invested assets minus its liabilities and then divided by the number of shares outstanding.

Mutual Funds vs ETFs: What You Need to Know

Nominal Interest Rate

The stated annual interest rate on a loan.

Nonrefundable Tax Credits

Tax credits that can lower the taxes you owe to zero, but not lower. In this way they differ with refundable tax credits, which can keep lowering your taxes even below zero, so that you can get more “back” from the IRS than you paid in taxes in the first place.

Tax Credits vs Tax Deductions: What’s the Difference?

Open Loop Gift Card

Typically issued by major credit card companies or financial institutions, open loop gift cards can be used virtually anywhere, online or in store. You’ll often pay a fee to buy an open loop gift card, depending on where it is purchased.

Opening Date

The day your billing period begins. This is always the day after your previous billing period’s closing date.

Ordinary Interest

A calculation of the daily periodic interest rate typically used in credit card interest that uses 360 days per year..

How to Calculate Interest Rates

Paid Charge Off

A status that appears on your credit report to show that a past due balance was resolved after being charged-off.

Passive Management

When passively managed, an investment fund simply mirrors the components of a particular market index, with the goal of matching that index’s performance.

Past Due Status

When a past due account is reported to the consumer credit bureaus, the account’s past due status appears on your credit report with a number to reflect how late the payment is (30, 60, 90, or 120+ days past due).

Pay to Current

Making a payment large enough to satisfy the past due balance that’s accumulated since you last satisfied your minimum payment requirement, including any interest or fees that were charged. Paying to current may improve your account’s standing and prevent additional negative consequences, such as late fees, penalty APR, and credit score impact.

Payment Due Date

The date by which you must make at least your minimum payment to keep your account in good standing. Your payment due date appears on your monthly statement and is typically scheduled about 25 days after that statement’s closing date. Paying your statement balance in full every month by your due date will prevent interest charges, if applicable.

Periodic Interest Rate

The nominal interest rate for a specific period of time, such as monthly or daily. It is determined by dividing the annual interest rate by the number of times per year interest compounds.

How to Calculate Interest Rates

Phishing Email Scams

Phishing is a crime in which someone impersonates another person or an institution in order to trick you into revealing sensitive information, such as your Social Security number, name and address, mother’s maiden name, bank or credit card account details, and usernames and passwords. Though phishing scams deceive many people every year, the technique is almost as old as email itself – it’s been observed since the 1990s. The name is generally thought to be a combination of “fishing” – indicating that criminals are using a lure to tempt you into providing your information – and “phreaking,” a once-notorious practice of hacking phone systems in order to get free calls.

Positive Investing

A method of socially responsible investing in which an investor chooses companies with the ideals they want to support, usually in hopes of contributing to the wellbeing of society. Common principles include fair trade, environmental sustainability, and tackling poverty.

A Guide to Socially Responsible Investing

Prepaid Cards

A card that must be pre-loaded with cash before it can be used for purchases. Prepaid cards are not technically credit cards and therefore do not affect your credit score.

Types of Credit Cards: Understanding the Differences

Pre-Qualification

Pre-qualification is how you find out which offers you're eligible for when a lender reviews your credit and extends a conditional offer. Depending on your credit profile, you might be eligible for more personalized offers, say, a higher Welcome Bonus, or a lower APR. If you apply for a credit card, your application will still be subject to the card issuer’s credit approval process.

Prime Rate

A common benchmark used for setting variable interest rates for consumer loans, the prime rate is the interest rate banks charge their very best customers.

How to Calculate Interest Rates

Principal

An amount of money being borrowed or invested. If a loan, the principal will initially be the total amount of the loan. After each monthly payment, the outstanding principal declines, although not by the full amount of the payment because a portion goes toward paying the loan’s interest.

Rate-and-Term Refinancing

A rate-and-term home loan refinancing is about saving money, usually by replacing your current mortgage with a new one that has a lower interest rate and/or shorter repayment schedule.

Guidelines for When and How to Refinance a Home Loan

Refundable Tax Credits

Tax credits that, in some cases, can get you “back” more money from the IRS than you paid in taxes in the first place. Unlike nonrefundable tax credits, which can lower the tax you owe to zero but no lower, refundable tax credits keep going below zero.

Tax Credits vs Tax Deductions: What’s the Difference?

Repossession

A repossession, also known as a repo, is when a lender seizes property after debt goes unpaid. For example, if someone fails to make payments on a car loan, the lender might take the car back, often with the intent of selling it in an effort to recoup losses from the failed loan agreement. If you can’t make payments on a loan, it’s better to try to work out a payment arrangement with the lender than to ignore missed payment notices.

How Long Does a Repo Stay on Your Credit Report?

Rewards Credit Card

A credit card that rewards spending with cash rebates, points or other rewards.

Secured Credit Card

A secured credit card is backed by a cash deposit from the card member. This deposit is collateral on the account, acting as security in case the card member can't make payments. Secured credit cards are often issued to borrowers with poor, limited, or no credit history.

Securities

When discussing finance, a security is a financial instrument (aka, a monetary contract) that has value and can be traded, such as shares of stock in publicly traded companies or corporate/government bonds.

Secured Loan

A loan for which the borrower pledges some asset, such as a car or property, as loan collateral.

Secured Overnight Financing Rate (SOFR)

A market-based measure of the cost of borrowing cash overnight by pledging U.S. treasury securities.

Fixed APRs vs Variable APRs

Securities

Financial instruments that can be traded, such as stocks, bonds, or other investments. Securities do not include owned tangible assets, like a home or boat.

Short Selling

In short selling, an investor tries to profit from an anticipated drop in a stock’s share price. The investor borrows shares of a security and sells them, expecting to buy them back later at a lower price.

Simple Interest

The most straightforward way interest is calculated, it multiplies the principal times the nominal, or published, annual interest rate times however many years the sum will be outstanding.

Socially Responsible Investing (SRI)

An investment philosophy that aims to support good in the world while earning returns.

A Guide to Socially Responsible Investing

Stop Order

An order to automatically buy or sell a security once its price moves past a specified point (the “stop” price). Stop orders, sometimes called stop-loss orders, are meant to help investors limit a loss or lock in a profit.

Store Credit Card

Student Credit Card

A product offered by some banks and intended to be a consumer’s first credit card. Applicants typically must prove they are enrolled at a qualifying college or university. They often have higher interest rates, lower fees, and lesser rewards than standard cards.

Tax-Advantaged Account

U.S. federal and state governments offer a number of tax breaks that require specialized bank or brokerage accounts. Different types of tax-advantaged accounts offer various kinds of tax benefits; some may be exempt from tax when certain circumstances are met, or may defer taxation to a later time. Examples of tax-advantaged accounts with different tax treatments include traditional individual retirement arrangements (IRAs), Roth IRAs, 401(k)s, and 529 plans for college savings. There are many others.

Travel Rewards Credit Card

A type of rewards credit card that a card issuer may offer on its own to reward general travel purchases, or in partnership with a hotel company or airline. Co-branded travel rewards credit cards typically provide the greatest benefits for spending at the hotel company’s properties or with the airline and its alliance partners.

Truth in Lending Act

The Truth in Lending Act is a section of the U.S. Code protecting consumers against inaccurate and unfair credit billing and credit card practices.

What is a Finance Charge on a Credit Card?

Unsecured Debt

Most unsecured debt comes from credit cards and personal loans in which the lender requires no collateral (e.g., house or car) from the borrower, but approves the loan and sets its terms based on personal financial data such as credit scores. Private student loans and medical expense loans are other examples of unsecured debt.

Unsecured Loan

A loan supported only by the borrower's creditworthiness. The lender requires no collateral (e.g., house or car) from the borrower, but approves the loan and sets its terms based on personal financial data such as credit scores. Unsecured loans are often referred to as signature or personal loans.

Variable Interest Rate

Variable interest rates fluctuate over time, meaning your monthly interest payment will likely change from time to time. Variable rates are usually tied to an underlying reference or benchmark rate that tends to move up or down in response to market conditions.

Can I Refinance My Student Loan?

Zero Interest Credit Card

A credit card that doesn’t charge you any interest during a specified introductory period of at least six months. Zero interest credit cards are typically available for balance transfers or purchases, but not both.

50/30/20 Rule

A budgeting plan that says 50% of your income should go to needs, like housing, utilities, and food; no more than 30% of your income should be for discretionary spending, or wants; and at least 20% of your income should be devoted to savings and debt payments.

The material made available for you on this website, Credit Intel, is for informational purposes only and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.

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Glossary

Credit Intel's glossary contains definitions of commonly used terms and phrases to help you navigate the world of personal finance.

Accrued Interest

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Active Management

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Adjusted Gross Income

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Airline Miles Credit Card

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Alternative Data

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Amortizing Loan

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Annual Effective Rate (AER)

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Annual Percentage Rate (APR)

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Annual Percentage Yield (APY)

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Authorized User

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Average Daily Balance (ADB)

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Balance Transfer Credit Card

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Bill Payment Service

Billing Period

Billing Statement

Brokerage Account

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Business Credit Card

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Cash Advance

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Cash Back

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Cash-Out Refinancing

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Cash Stuffing

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Charge Card

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Charge-off

Child Tax Credit

Childcare Tax Credit

Closed Loop Gift Card

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Closing Date

Collateral

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Community Investing

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Compound Interest

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Continuous Interest

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Cosigner

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Credit Card

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Credit Card Annual Fee

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Credit Card Outstanding Balance

Credit Card Statement

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Credit Card Statement Balance

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Credit Counseling Agency

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Credit Freeze

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Credit Limit

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Credit Lock

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Credit Report

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Credit Reporting Agencies

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