Credit Cards » Glossary

Glossary

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  • Online Debit Card
    An online debit card works the same way as a regular debit card except that it applies exclusively to purchases made online. When buying something with an online debit card, you will need to enter your PIN, or personal identification number. Online debit card purchases are deducted from your bank account immediately; if there are not sufficient funds in your account, the purchase will be declined.
  • Open End Credit
    Open end credit refers to a revolving line of credit extended to customers by banks and other lenders. This may take the form of a credit card account where the available credit is replenished each time the balance is repaid. Customers can pay a minimum balance each month, avoiding fees but accumulating interest charges on the balance, or they may pay the balance in full and avoid interest charges.
  • Overdraft
    An overdraft occurs when you attempt to withdraw more than the available balance from your account, creating a negative balance. The bank may allow the withdrawal, depending on your history and financial arrangements with them. Or, they may decline the withdrawal. In either case, you will likely incur overdraft fees.
  • Payment Cap
    The payment cap refers to an aspect of an adjustable rate mortgage (ARM) that caps, or limits, how much the monthly payment can be changed. Usually this means that the monthly payment can only increase by a certain percentage of the previous payment. This does not usually affect the rate of interest charged on the mortgage.
  • Penalty Rate
    A penalty rate is a raised interest rate imposed on your credit card account. This penalty usually kicks in if you have been late with your payments one or more times. The terms of the credit card agreement specify what the penalty rate will be. The credit card issuer may also impose a penalty rate on your account if you have been late in paying, or defaulted on, another loan, or run over your credit limit. In other words, if you become a poor credit risk, you may be hit with a penalty rate.
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