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Financial Glossary

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

A

Affinity card - a card offered by a non-lending institution and a non-financial group (ex. non-profit organizations, universities, airlines or celebrities). Typically, the organization solicits all of its members and affinity card gives holders special discount or deals from the non-financial group. The organization receives brand loyalty from the card users and a small percentage or fee from the credit card company.
Air miles - a popular reward program by co-branded cards. Air miles are earned with every use of the card and transferred to the cardholder's account with that airline.
Annual fee - fee charged for having the card each twelve-month period.
Annual percentage rate (APR) - the annual percentage rate is the method of stating the interest rate you will pay if you carry over a balance, take out a cash advance, or transfer a balance from another card. The APR states the interest rate as a yearly rate. For example, a 5% quarterly return has an APR of 20%. Credit cards often have several different APR's - one for cash advances, one for balance transfers and one for purchases. Some lenders may increase the APR if a payment is late.
Application fee - amount a lender charges to process loan application documents. Quality lenders do not charge these fees (though they may charge many others).
Appraisal fee - the amount charged to deliver a professional opinion about how much a property is worth. For a standard home or condominium, this fee is usually from $150 to $600.
Authenticate - to verify the identity of a user, user device, or other entity, or the integrity of data stored, transmitted, or otherwise exposed to unauthorised modification in an information system, or to establish the validity of a transmission.
Authentication - security measure designed to establish the validity of a transmission, message, or originator, or a means of verifying an individual's authorisation to receive specific categories of information.
ATM - Automated Teller Machine, or cash machine. An automated dispenser of cash and banking services.
Attack - An intentional act of attempting to bypass one or more computer or network security controls.

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B

Back-to-back loans - Arrangement whereby a loan in one currency is set against a loan in another currency. It can be used to avoid or overcome exchange risks and exchange controls. Also known as parallel loans.
Balance-transfer fee - the fee that will be imposed each time when transfering a balance from another card.
Bankruptcy - a court proceeding in which the assets of an individual are liquidated and releases an individual from repaying a portion or all debts owed. Bankruptcy damages your credit for 7-10 years and should only be considered as a last resort if you cannot repay your debts.
Blanket loan - blanket mortgage is used when a mortgage client securing several parcels of property, frequently used by developers who have purchased a single tract of land intending to subdivide into individual parcels. The developer normally requires a "partial release" clause so that individual parcels can be released from the blanket mortgage as they are sold.
Blue sky laws - State laws in the United States aimed at protecting the public against securities frauds. They require new issue offerings to be registered with full financial details provided. The phrase is thought to derive from a reference by a Supreme Court judge that some investment schemes had about as much value as a patch of blue sky.
Bridge loan (or swing loan) - a short-term loan which is typically taken out for a period of 2 weeks to 3 years in order to finance projects. Bridge loans are often used for commercial real estate purchases, to quickly close on a property, retrieve real estate from foreclosure, and to take advantage of a short-term financing opportunity in order to secure long term financing. Speed is a bridge loan's number one asset.
B2B - Business to Business trading of goods and services on the internet.
B2C - Business to Consumer or end-user trading of goods and services on the internet.

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C

Cardholder - the person who is issued a credit card and/or any authorized users.
Cash advance fee - charged when using the card for a cash advance; may be a flat fee (for example, $3.00) or a percentage of the cash advance (for example, 3%)
Charge card - a card which requires a full payment of the charge by the due date. There is no carryover balance or interest rate charge. Charge accounts with local businesses often require payment on this basis.
Co-branded cards - a credit card issued in partnership between a bank and another retail company. Similar to an affinity card. Many departments offer co-branded cards with special deals or discounts on purchases at their store. Co-branded cards often come with a large annual fee.
Co-signer - a joint signer of a credit card application with the principal applicant. Should the principal applicant default on what he owes, the co-singer is responsible for paying the balance due.
Credit card - an ISO 7810 card that allows the holder to make purchases on borrowed money, repayable at varying intervals and at varying rates of interest. A widespread and popular means of obtaining credit for goods and services in developed economies, particularly the United States.
Credit history - term used for the information on your credit report. Your credit history is a record of how you have has repaid your credit obligations in the past.
Credit insurance - insurance that pays off the credit card debt should the borrower lose his job, die or become disabled. The payoff is calculated monthly to only cover the debt that was recorded on the last billing cycle.
Credit limit - the maximum amount of credit that is allowed on an account.
Credit period - the length of time for which the customer is granted credit.
Credit repair - generally unscrupulous or illegal form of a credit counseling that promises the impossible - erasing accurate records from your credit report, thus changing your credit history.
Credit report - if you have ever applied for a credit card, a personal loan, or insurance, there is a file about you. This file includes where you work and live, how you pay your bills. It even includes whether you have been sued, arrested, or filed for bankruptcy. Credit Reporting Agencies gather and sell this information to creditors, employers, insurers and other businesses. It is advised to check your credit report for accuracy periodically in order to know what has been reported and correct any errors. To check on your credit report contact the three major national credit bureaus: Equifax, Experian and Trans Union.
Credit Scoring - a scoring system is used by creditors to determine if you are a good risk for credit cards, auto loans and/or home mortgages. The system is used to analyze data from your credit application and credit report about your the number and type of accounts you have, bill-paying history, collection actions, late payments, outstanding debt and the age of your accounts. It treats all applicants objectively by comparing your credit information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. The lower your score, the higher your interest rate will be.

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D

Debit card - an ISO 7810 card which physically resembles a credit card, and, like a credit card, is used as an alternative to cash when making purchases. However, when purchases are made with a debit card, the funds are withdrawn directly from the purchaser's current/checking or savings account at a bank or credit union.
Debt - money borrowed. The supply of funds from a creditor to a debtor in exchange for interest and a commitment to return the funds in full at a fixed date in the future. Debt is usually in the form of financial instruments such as bonds, bills and notes. Creditors, who can be private individuals, banks or institutions such as pension funds and insurance companies, lend the money in the belief that the debtor will honour the obligation to pay the interest and eventually to repay the capital of the loan. Debt instruments have a defined life, a maturity date and normally pay a fixed rate of interest. All purchasers of debt have a supply of cash which is not immediately needed, on which they wish to earn interest until it is required for their own direct use. The interest is a payment for their willingness to forgo use of the funds for a fixed time.
Discount interest rate - interest rate having a reduction of a standard variable rate (e.g. a 2% discount) for a set period (typically 1 to 5 years). Sometimes the rate is stepped (e.g. 3% in year 1, 2% in year 2, 1% in year three).

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E

ECOA - an Equal Credit Opportunity Act that protects consumers from discrimination on the basis of sex, age, race, public assistance income, marital status, nationality or religion in the credit and lending processes.
E-commerce - Electronic commerce. A term used to describe all forms of buying and selling of goods electronically.
EBT - Earnings Before Tax
Equity loan - is a mortgage placed on real estate in exchange for cash to the borrower. E.g. if a person owns a home worth $100,000, but does not currently have a lien on it, they may take an equity loan at 80% loan to value (LTV) or $80,000 in cash in exchange for a lien on title placed by the lender of the equity loan.

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F

Finance charge - the total cost of using credit. Besides interest charges, the finance charge may include other costs such as cash-advance fees.
First mortgage - the primary loan on a real estate property. This loan has priority over all other "secondary" loans.
Firewall - is a hardware or software solution which enforces security policies. From a physical perspective, a firewall is equivalent to a lock on a door. It permits only authorised users such as those with a key or access card to enter. A firewall has built-in filters that block unauthorised or potentially dangerous material from entering the system. It also logs attempted intrusions.
Fiscal year - the accounting year, often starting in either January or April.
Fixed rate - an interest rate for a credit card or loan that remains constant.
Fixed-rate option - a home equity line of credit financing option that allows borrowers to specify the payments and interest on a portion of their balance. This can be done a few times during the life of the loan, usually for an additional fee.

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G

Gold Card - a card offering a larger line of credit than a standard card. Credit line is usually between $2,000-$5,000. Income requirements are higher, typically $35,000 at minimum. Gold card users receive extra perks and incentives such as travel service, rental card insurance and insurance for purchases.
Grace period - the time period agreed by a lender, often about 25 days, during which a borrower have to pay bill or interest in full without triggering a finance charge.
GEMs (growing-equity mortgages) - mortgages in which annual increases in monthly payments are used to reduce outstanding principal and to shorten the term of the loan.

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H

Hacker - unauthorised user who attempts to or gains access to an information system and the data it supports.
Hard money loan - a specific type of financing in which a borrower receives funds based on the value of a specific parcel of commercial real estate. It is typically issued at much higher interest rates than conventional commercial or residential property loans and is almost never issued by a commercial bank or other deposit institution.
Home equity - the part of a home' s value that the mortgage borrower owns outright. This is the difference between the fair market value of the home and the principal balances of all mortgage loans.

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I

Identity theft - (or identity fraud) occurs when someone wrongfully acquires or uses another person's personal data, typically for their own financial gain.
Interest - the price paid for borrowing money. It is expressed as a percentage rate over a period of time and it reflects the rate of exchange of present consumption for future consumption. Also, a share or title in property.
Interest rate - the monthly effective interest rate. For example, the periodic rate on a credit card with an 15% annual percentage rate is 1.4% per month.
Introductory rate - the "teaser" low rate charged by a lender for an initial, temporary period to encourage customers to switch cards. After the introductory period is over, the charged rate increases to the indexed rate or the interest rate.

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J

Joint account - an account shared by two or more people. Each person on the account is legally responsible for the debt and the account will be reported to each person's credit report.
Jumbo mortgage - a mortgage with a loan amount above conventional loan limits. Jumbo Mortgages apply when agency (FNMA and FHLMC) limits don't cover the full loan amount. Currently, this limit is $417,000.

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K

Key logger - a program that logs a user's keystrokes and transmits that information to a fraudster. Key Loggers can infect a computer from an email or directly from a website.

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L

Late-payment fee - the fee that will be imposed when your payment is late.
Limits - some credit cards limit cash advances to a dollar amount (e.g. $200 per cash advance or $500 per week) or a portion of your credit limit (e.g. 75% of your available credit limit).
Loan - if you borrow $2 million dollars, it is said that you have taken out a loan for $2 million dollars.

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M

Manufactured housing securities (MHSs) - loans on manufactured homes - that is, factory-built or prefabricated housing, including mobile homes.
Minimum finance charge - the minimum, or fixed, finance charge that will be imposed during a billing cycle. A minimum finance charge usually applies only when a finance charge is imposed, that is, when carrying over a balance.
Mortgage - a loan secured by the collateral of some specified real estate property which obliges the borrower to make a predetermined series of payments.
100% mortgage - a mortgage that require no deposit (100% loan to value). It is usually offered to first time buyers, but almost always carry a higher interest rate on the loan.

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N

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O

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P

Package loan - a real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings and major appliances.
Penalty rate - after one or two late payments (varies between credit cards), adds several percentage points to the existing APR.
Personal identification number (PIN) - the personal security number required to be entered into a keypad at the point of sale to complete the transaction. The cardholder usually selects the number and can change it.
Platinum card - a credit card with a higher limit and more perks than both a standard card and gold card.
Pharming - is a scamming practice in which malicious code is installed on a personal computer or server, misdirecting users to fraudulent Web sites without their knowledge or consent. Pharming has been called "phishing without a lure."
Phishing - is a form of criminal activity and is characterized by attempts to fraudulently acquire sensitive information, such as passwords and credit card details, by masquerading as a trustworthy person or business in an apparently official electronic communication. Phishing is typically carried out using email or an instant message.
Premium card - a card which offers higher credit limit and usually have extra features e.g. product warranties, travel insurance, or emergency services. Premiun card can be a gold, platinum or titanium.

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Q

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R

Rebate card - a card allowing the customer to accumulate "rewards" such as merchandise, cash or services based on card usage. Rewards are usually airline tickets, discounts on future purchases or cash refunds.
Regular card - a card which do not require a security deposit and have just a few features. Most regular cards have higher credit limits than secured cards but lower credit limits than premium cards.
Reverse mortgage - (known as lifetime mortgage in the UK) is a type of loan available to seniors (62 and over in the US), used as a way of converting their home equity (the value of the home, minus the amount of any existing mortgages) into one or more cash payments while retaining ownership of the property and avoiding monthly payments. Repayment of the loan is deferred until the borrower is no longer living in the home.

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S

Secured card - credit card which requires a security deposit. .
Security - a piece of paper that proves ownership of stocks, bonds and other investments.
Spam - indiscriminately sending unsolicited, unwanted, irrelevant or inappropriate messages, especially commercial advertising in mass quantities, is considered spam.
Spoofing - impersonating another person or computer, usually by providing a false email name, URL or IP address.

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T

Teaser rate - the introductory rate of a credit card. Usually a temporary lower rate to encourage customers to switch credit cards. After the teaser rate is over, the charged rate increases to the indexed rate or the interest rate.
Transaction date - is the purchase date of goods or services or the date of the cash advance.
Trojan horse - is a malicious program that pretends to be a benign application; a Trojan Horse program purposefully does something the user does not expect. Trojans are not viruses since they do not replicate, but Trojan horse programs can be just as destructive and may be spread as a result of a viral infection.

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U

Unsecured debt - a debt that is not backed by the promise of any collateral, such as a savings deposit. Most credit cards are unsecured debt. To compensate for this additional risk, credit card issuers charge higher interest rates than other forms of lending such as a home mortgage.

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V

Virus - self-replicating, malicious code that attaches itself to an application program or other executable system component and leaves no obvious signs of its presence.

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W

Whole life insurance - a contract with both insurance and investment components: 1) It pays off a stated amount upon the death of the insured. 2) It accumulates a cash value that the policy-holder can borrow against or redeem.
Worm - independent program that replicates from machine to machine across network connections often clogging networks and information systems as it spreads.

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X

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Y

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Z

Zero-balance account (ZBA) - a checking account in which zero balance is maintained by transfers of funds from a master account in an amount only large enough to cover checks presented.

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