CREDIT and FINANCE GLOSSARY A-C

     
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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. There is a limit for the account on the total amount that can be spent with the card each month. The limit applies to both the main and the additional cardholders. It is called a credit limit.

Administration Fee
This is a fee charged by some lenders, which is not refundable if the mortgage application does not proceed. The Administration fee will often form part of the valuation fee but will be retained by the lender even if the valuation has not been carried out.

Affinity card
Affinity cards are credit cards that are linked to organisation like charities, football clubs, political parties and other voluntary groups. Affinity cards are a good way of raising money for a charity or football club and are often used by supporters instead of a conventional credit card. The card issuer donates money (usually £5-£10) to the organisation when you first take out an affinity card and also whenever you use the card to buy things. In every other respect, affinity cards are the same as normal credit cards.

American Express
American Express (or Amex) is one of the main international credit card payment schemes. Unlike Visa and MasterCard, the other main payment schemes, Amex also issues cards itself. It is also responsible for operating the money transmission networks which link outlets, acquirers and issuers.

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.

Annual Review
The interest you pay changes annually. The change is based on an average calculation of the previous year's base rate.

Annuity Mortgage - (See Repayment Mortgage)

APR
Annual Percentage Rate - This is meant to show the true cost of borrowing and adjusts the notional interest rate to take account of all the initial fees and ongoing costs to reflect the real cost of borrowing throughout the entire mortgage term. Unfortunately there is currently some disagreement over how this rate should be calculated and some distortions occur. Whilst this could be a good way to compare relative deals care should be taken to ensure that the rates being compared have been calculated on the same basis.

Arrangement Fee
This is a fee charged by some lenders in order to access particular mortgage deals. Arrangement fees particularly apply if you are looking for a fixed rate or discounted rate mortgage and these may either be payable up front, added to the loan on completion, or deducted from the loan on completion (check with the chosen lender which situation applies).

Arrears
Contracted mortgage payment not made by the due date. Applicants who have arrears on a current mortgage may experience problems if attempting to arrange a new mortgage through the mainstream lenders. A number of lenders do, however, specialise in this area of the market.

A.S.U.
Accident, sickness and unemployment insurance (sometimes referred to as A.S.R. - accident, sickness and redundancy insurance). This is an insurance policy, which is taken out by the borrower and protects against the borrower being unable to work for the stated reasons. The policy will usually pay a percentage of the normal monthly mortgage repayment (plus insurance) if the borrower is unable to work due to accident/sickness or unemployment/redundancy. These payments will normally only be made for a limited period of time - typically 6/12 months or until the borrower returns to work. The terms of these policies and the cost vary considerably from company to company.

ATM
ATM stands for Automated Teller Machines - often called cash machines. ATMs allow you to take out money from your bank or building society account or to get cash advances with a credit card. Before you can draw money out of the machine with a credit card, debit card or ATM card, you must type in your personal identification number (PIN). This number is secret and unique to you. You must not tell anyone your PIN because it is the key to your bank account. Even bank staff do not know the number.

Authorisation
Every shop has a different limit for the amount of money you can spend on a card in the shop without it being checked first with the issuer. When you buy things which are more than this limit, the sale has to be authorised by the card issuer. This can either be done by telephone or electronically when the card is swiped through the till by the shop assistant. In this way, stolen cards are caught and cardholders are stopped from going over their credit limit. Sometimes to authorise the transaction, the issuer needs to check the cardholder's identity. Some cards, for example Electron (Visa) and Solo (Switch), always require authorisation whatever the amount.
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Balance
An amount of money you owe, such as a balance on credit card. An amount of money you own in a Building Society / Bank

Balance transfer
The transfer of other outstanding balances (for example, from other payments, cards or loans) to a new card. Transferring your balances to a single card allows you to consolidate your debt in one place with one rate. Balance Transfers often offer a lower rate than that applicable for card purchases or cash advances, that is usually valid for only a limited time.

Bankruptcy
A legal declaration made by someone (either voluntary or not) that he or she is legally insolvent.

Budget
An itemised list of money a person (or company) will take in, and how much will be paid out (expenses), over a specified period of time (usually monthly

Budget Card
Budget cards work like a credit card, except for the credit limit. You agree with the issuer to pay a set amount each month by direct debit. The credit limit is a multiple of the pre-set amount you have agreed.

Building insurance
Lenders may insist that you take out this cover. It protects you and the lender in case the building falls down or is fundamentally damaged. Most lenders will offer this as part of the mortgage, but you are not required to take it from them. However, the lender may charge an administration fee of around £25 should you decide to take it via another channel.

Buy to Let
A term used to describe the purchase of a residential property for the sole purpose of letting the property to a tenant. Whilst the majority of lenders will not provide mortgage finance for this purpose a number do specialise in this niche area of the market.
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Capital and Interest Mortgage - (see Repayment Mortgage)

Capital Raising
Normally refers to a re-mortgage when additional fluids are taken over and above the amount required to repay the existing mortgage debt which is then used for personal finance purposes.

Capped Rate
A capped rate is a mixture between a fixed rate and a variable rate. The interest rate is guaranteed not to rise above a set level within the capped rate period but if the normal variable mortgage rate is below the capped rate then the variable rate is charged. This gives the 'best of both worlds' as the interest rate can fall but will not rise above the capped rate. However, the level at which the cap is fixed is usually higher than for a fixed rate mortgage for a comparable period of time. Sometimes 'Cap and Collar' mortgages are offered and these impose a minimum payment rate (the collar) in addition to the maximum rate (the cap). The lender will normally impose early redemption penalties if the mortgage is redeemed within the first few years (see Redemption Penalties).

Cash Advances
You can borrow cash using a credit card in two ways: first, by using a cash machine and secondly, over the counter in a bank or a building society. There is usually a charge of 1.5 per cent of the amount of the cash advance. Alternatively, some issuers charge interest as soon as the money has been advanced, regardless of whether the bill is paid in full.

Cash back (on credit cards)
A cash reward paid for using the card. Issuers pay back a percentage of the amount spent on the card either at the end of the month or at the end of the year.

Cash back (on mortgages)
This is the arrangement whereby a cash sum of money is repaid to the borrower at the start of the mortgage. The amount of the cashback will vary considerably from lender to lender with the highest amounts being paid where the borrower is willing to forego any fixed or discounted rate offers and pay the normal variable mortgage rate. Cashback deals are also available in conjunction with some fixed or discounted rates but the amount of the cashback will normally be reduced in these circumstances. If a large cashback is being considered then it could, in some circumstances, be liable to Capital Gains Tax (refer to the lender, your accountant or local tax office for clarification). The lender will normally impose early redemption penalties if the mortgage is redeemed within the first few years (see Redemption Penalties).

Capped rate mortgages
The interest rate is variable, but guaranteed not to exceed a certain level for a set time period (for example, several months or years).

CCJ - See County Court Judgment

Central Registry
All Judgments are sent here for processing prior to them being sent to the credit agencies.

Charge Card
Charge cards allow you to spend money up to your credit limit, but you must pay back the full amount each month. The most common charge cards are American Express and Diners Club.

Cheque Guarantee Card
A cheque guarantee card normally guarantees cheques up to £50. The shop is only guaranteed to be paid when the shop assistant writes the card number on the back of the cheque. The shop assistant also has to check other things like the signature. Some cards only guarantee cheques but others have several uses and can be used as debit cards and for withdrawing money from cash machines.
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Chip cards - See Smart cards

Cirrus
Cirrus is a network of cash machines which are part of the MasterCard system. If you have a card with the Cirrus sign on it you can take out cash from ATMs around the world which display both the Cirrus and MasterCard signs. The cash is given out in the local currency and debited to your account in pounds. There is a charge for using Cirrus - usually 1.5-2.5 per cent of the amount taken out.

Completion
(i) The final stage in the home buying process, completion is the legal transfer of ownership of the property.
(ii) The moment that your mortgage commences.

Conditional Insurance
This refers to insurance products that some lenders will impose as a condition of their mortgage offer. This could mean that the lender insists that accident, sickness and unemployment cover is taken out or that combined buildings and contents insurance is taken. If looking for a fixed or discounted product then these conditions should especially be watched for.

Consumer Credit Act
The CCA is there to protect individuals and to ensure that the Finance Houses comply with set rules.

Contents Insurance
Covers the contents of your house (for example, TV, furniture, clothes, etc.) against theft, fire or damage from flooding etc. The policy will also cover liability claims against you should someone be injured in your home.

Conveyancing
The legal process of buying and selling a property.

County Court Judgement (CCJ
A judgement for debt recorded at a County Court. These judgements will be shown when the lender carries out a credit search. If the debt has been repaid, subsequent to the judgement being recorded, then the entry will be marked 'satisfied'. The appearance of CCJ's on the credit register will greatly reduce mortgage options and nearly all lenders will insist there are no outstanding judgements.

Credit
A means of borrowing money from a person or a company and returning it at a later date, usually with interest charged.

Credit card
Credit cards allow you to make immediate purchases and then decide over what period to pay. You are sent monthly statements showing what you have bought. You can either repay the full amount (usually free from any interest) or pay back only some of the amount. Normally, you must pay at least £5 (or 3-5 per cent) of the overdue amount each month

Credit Counsellors
Qualified people who provide a service and are able to offer advice on how to manage outstanding debts and to answer other credit questions.

Credit History
A partial profile of your financial life within a given period of time (usually measured in years). It shows the extent to which you pay your bills on time and how much you owe particular companies.

Credit Limit
The credit limit is the maximum limit on the amount of money that you may borrow on your credit card account. The issuer decides on the limit for each customer based on the information given on the application form. The credit limit may be changed over time. Some issuers change the limits automatically by watching the way you spend and repay. Other issuers only offer to raise the credit limit when the customer asks them to.

Credit Reference Agency
Issuers use credit reference agencies to check your identity and the credit history when you apply for a credit card. The information provided includes whether you are a voter at the address you have given (which means you'll be on the electoral register), whether you have failed to repay your debts or whether you have been taken to court for not paying back a debt. Everyone is allowed to see his or her own records.

Credit Report
A document that list your credit history created and updated using information from Banks, Retailers and other sources, i.e. Courts.

Credit Scoring
Credit scoring is an unbiased way of deciding who should receive credit. By giving points based on the information supplied on the application form, the lender decides whether to give you credit. Your age, how much money you earn, how much money you owe and other factors are taken into account. Credit is given only to those applications which score a certain amount of points. This is decided by the issuer and varies from lender to lender.

Current account mortgage
A type of Flexible Mortgage which also includes a current account.
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