Types of Credit Vocab

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Adjustable-Rate Mortgage (ARM)

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A mortgage in which the initial interest rate is normally fixed for a specified period of time after which it is reset periodically, often every month.

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401(k) Loan

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A type of loan where you borrow money from your retirement savings account. You must pay that borrowed money back, plus interest, within 5 years of taking your loan, in most cases.

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Amortization

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The paying off of debt over time in equal installments; part of each payment goes toward the loan principal while the other part goes toward interest.

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Annual Fee

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A yearly fee that may be charged for having a specific credit card, independent of how you use the card.

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Annual Percentage Rate (APR)

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The cost you pay each year to borrow money, including fees, expressed as a percentage.

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Authorized User

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A person who has permission to use and/or carry another person's credit card, but isn't legally responsible for paying the bill.

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Balance Transfer

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The act of transferring debt from one credit card account to another, usually for a fee.

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Cash Advance

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A credit card service that allows cardholders to withdraw a certain amount of cash, either through an ATM or directly from a bank, typically at a high interest rate or for a fee.

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Cash Back

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A credit card benefit that pays the cardholder a small percentage of their net expenditures, often as cash, payment toward their balance, reward points, travel miles, or gift cards.

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Charge Card

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A special type of credit card with no interest because you must pay the balance in full each month.