managing credit cards Archives | Ovation Credit Repair Services

Credit Glossary

By | Credit Cards

Dealing with credit card companies and other lenders can be like traveling in a foreign country. The laws aren’t completely clear, and there’s a language barrier making things even more challenging. To navigate this unknown territory, it is important that you learn the language. The following glossary terms will prevent you from getting lost, and more importantly, will help you manage your finances.

Annual Fee – A yearly fee that accompanies some credit cards, which is not included in other fees or interest rates.

Annual Percentage Rate (APR) – This is the yearly interest rate that includes any fees associated with acquiring the loan. This rate is found by dividing the average compound interest rate over the loan term.

Balance Transfer – This is the process of moving unpaid debt from one credit card account to another. Consumers will sometimes transfer at the promise of lower interest rates, but there is a fee to disconnect from the initial account.

Billing Cycle – The span of time between billing statements, often ranging from 20 to 31 days.

Billing Statement – Typically created once per month, this statement lists all transactions made during the specified billing cycle, as well as fees, charges and credits.

Cash-Advance Fee – The fee banks charge when credit cards are used to obtain cash, either as a percentage or as a flat dollar amount. Cash advances also carry higher interest rates.

Chargeback – A transaction or payment that is returned either because of noncompliance with rules or because of a dispute made by the cardholder.

Charge-Off – When a creditor decides that the amount owed is unlikely to be collected. However, the debt is still owed.

Credit Dispute – The process of disputing a negative mark or other mistake on your credit report. You can dispute as often as necessary, with the burden of proof falling on the credit bureaus.

Credit Freeze – This stalls and prevents any transactions on a credit card account by establishing a security alert, often through one of the credit bureaus.

Credit Limit (Credit Line) – The total amount you can charge to a credit card account, often determined by your credit history.

Credit Repair – The process of fixing bad credit, whether you are disputing something on your credit report or recovering from debt.

Credit Report – This is a detailed report, prepared by one of the three credit bureaus, which is used to establish your eligibility for loans and other related credit. This includes your credit history, employment history and other relevant information.

Credit Score – Your credit score is a numerical expression, based on the analysis of your credit report, that determines your creditworthiness

Finance Charge – A charge that is applied for the use of the credit card, including interest costs and other fees.

Grace Period – Applicable only to those who do not carry a balance, it is an interest-free period of time the lender allows between the transaction date and the billing date.

Interest Rate Cap – This is the maximum amount of interest that a company can charge you, set in place by the federal government to protect consumers.

Minimum Payment – It is the smallest amount you can make towards your loans without the account defaulting. This will vary according to interest rate and the outstanding balance.

Over-The-Limit Fee – A fee charged to a credit card holder when the credit limit has been exceeded.

Pre-Approved – This is an initial sweep of potential applicants by credit card companies, not a guarantee. After an analysis of a credit report, a potential consumer may not actually be approved.

Secured Card – Often a tool for those trying to build credit, this is a type of credit card that is acquired with a deposit. This ensures payment if the account defaults.

Standard Interest Rate – This interest rate is relatively stable, but the credit card company does have a right to change its terms at any time.

Time-Barred Debts – Debts that have not been collected on after the statute of limitations are no longer viable, and you cannot be sued for the money that was owed.

Truth in Lending Act (TILA) – Federal Law established in 1968 that ensures full disclosure of credit terms, to prevent unfair billing and credit card practices. The consumer has the right to make comparisons between credit card companies.

Variable Interest Rate – The amount a borrower pays the lender for the use of their money, which may change as other interest rates vary.

New Credit Card Standards – Not So Sweet

By | Credit Cards, Credit Laws, Credit Scores, Debt

You know how it is. You go on a diet –stick with it a few weeks, maybe months. Even lose weight. Then comes a birthday party, holiday, or stressful moment. Out goes the diet and on come the pounds. It’s the same with credit debt. Coming out of this recession, a lot of people were trying to reduce their dependency on credit cards and they were doing a really good job for quite a while. The recent trend is that people are relying on credit card debt again.

Credit card companies are now loosening their standards. They sweeten the deal to make it easy to accrue debt and then profit from unpaid balances. The total number of bank or credit cards issued jumped 27% in May compared to a year earlier, according to credit reporting bureau Equifax. From January and May, nearly 15 million new bank cards were issued — the highest level in three years.

Our position is that credit cards aren’t used to pay for ordinary living expenses unless the balance is paid off every month. We caution people not to use their credit card just because it’s available. Use it responsibly, preferably only for emergencies. We’ve talked about this in the past regarding cell phones, luxury items and other high end items. It’s important to be very sensitive to how much those items really cost if a credit card isn’t paid off each month. People are wasting $9.73 a day (or more depending on the payment plan) in interest payments. Americans actually added $18.4 billion to their debt load in the second quarter, a 66% increase from the debt they accumulated in the same quarter last year.

Tools like those offered by Ovation can help you understand exactly how much of that hamburger you just had to buy on the credit card is actually going to end up costing you. You can login and see how long you are carrying debt for a particular item; for example, if you’re just making minimum payments or paying a certain amount above the minimum each month. We believe these tools help our customers realize that credit cards are an expensive way to pay for something when you calculate the interest that accrues on top of the purchase price. It’s often better to wait until you can pay cash for the item.

If you find yourself falling back into unhealthy financial habits, tighten your belt again. Turn away from the sweet credit offers – like the calories in the cake you’re trying to give up, the interest will cost you more than you want in the end. By overcoming the temptation, your credit score will weigh in at a healthy level and you will have more money available to manage your budget successfully.

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