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• J

Joint Credit

As the name suggests, joint credit is a form of credit held between two people. This is almost always a married pair. The loan or line of credit is available for both members of the couple to use, either separately or together – although major decisions about the account will always require the consent and/or signatures of both signers. The decision as to whether to extend joint credit is based on the combined assets and incomes of both potential signers, as well as their unique credit scores. If one member of the couple has poor credit, the spouse will lose out by their average score being lowered. On the whole, assuming that the couple’s credit scores are within the same tier, a joint credit account will usually carry a higher spending limit than one issued to an individual. Both people signing for a joint account will be liable for the full amount of the debt at all times, no matter who ran up more of the spending. For this reason, it is unwise to sign up for a joint account with anyone unless you have one hundred percent confidence in their spending habits and ability to help you repay the loan on time and in full.

Joint Liability

Joint liability is what is held by two people who share a joint credit account. As the name implies, the liability (responsibility) for any debt accumulated on the account belongs to both signers, since the account is in both of their names.

• L

Late Fee

A late fee is charged to a consumer who – are you ready for this? – doesn’t pay their bill on time. I reckon that most folks reading this knew that already. Late charges are ridiculously expensive, and one of credit card companies’ biggest sources of moneymaking. Do what you can to make your payments in a prompt fashion. It’s the best thing for your credit score, and it’s the best way to stick it to “the man”… in this case, the fat cats living high off the back-breaking penalties imposed upon wage slaves. One of the biggest and most common mistakes made by young adults paying bills on their own for the first time is assuming that a lender will consider a payment on time if it is in the mail or paid online / by phone on the due date given. In fact, the payment must be processed by the lender by the due date for the customer to be safe from any penalty charges.

Liabilities

“Liability” is another term for “responsibility” in the world of banking. One’s liabilities include their debts owed and whatever legal obligations they might have. Semantically, “liability” usually refers to something negative and is used interchangeably with “fault” or “onus.” Not all debts are bad, nor are all liabilities. Owning up to one’s responsibilities (whether financial or otherwise) in a mature and grown-up fashion is one of the classic hallmarks of adulthood.

LIBOR Rate

Across the pond, the LIBOR is our British counterparts’ answer to the prime rate we use as the basis for determining the cost of so many variable-rate lending products. LIBOR is an acronym for “London Interbank Offered Rate.” Financial institutions in London, England lend money to one another through the wholesale money market at the LIBOR (which is usually called “the LIBOR rate,” despite the redundancy). Even though it is not much-utilized in this country, the LIBOR is published regularly in the Wall Street Journal as one of the crucial indices upon which the cost of variable-rate loans are determined. Historically, the LIBOR has fluctuated much more gradually than the prime rate, and is considered to be a more stable index.

Line of Credit

A line of credit is any agreement by a bank to allow a consumer to borrow as much as a certain, predetermined amount of money for a certain rate over a certain period of time. A credit card is a line of credit. The credit limit is the maximum amount of the credit line, and there is a contract between the financial institution and the customer that the customer will make regular payments of at least the predetermined minimum until the loan is repaid in full, or until the loan is called for whatever reason by the bank.

Liquidity

Liquid assets are those that are in the form of cash, and able to be readily and quickly used as needed for whatever reason. Liquidable assets are those that can be turned into cash through sale. Liquidity refers to the relative ability to turn assets into ready cash without sustaining major financial losses. If a business or individual with few or no liquidable assets encounters major financial troubles, they will be in a major bind.

• M

Margin

The margin is the amount, expressed as a percentage, that a lender adds as “padding” onto a loan to make a profit. The margin is in addition to the rate determined by whatever index the bank is using, and the sum of the two percentages is the final cost of the loan (or the interest rate that the customer will be given). If the prime rate is the index for a given loan and is at seven percent, and the bank’s margin is three percent, the total cost of the loan for customers will be ten percent.

Member Bank

A member bank is part of the Federal Reserve System. It’s deposits are insured by the Federal Deposit Insurance Corporation, and its operations are governed by the Fed’s guidelines. These institutions keep reserve deposits in their respective district’s Federal Reserve Bank location. Odds are that all commercial banks with which you do business on a daily basis are member banks of the Federal Reserve System.

Merged Credit Report

A merged credit report is one with information compiled and merged from information coming from all of the “Big Three” credit bureaus – Trans Union, Equifax, and Experian. A merged credit report may be considered one of the best and most accurate snapshots of a consumer’s actual credit information and spending habits in the United States, owing to the comprehensiveness of the data contained within it.

Minimum Payment

The minimum payment for a loan or credit card is the smallest regular remittance a consumer can make that will keep the account in good standing and out of default. The minimum payment is almost always a percentage of the outstanding balance of the card or credit line, which means that it may vary from month to month. The contemporary industry standard for credit card payment minimums has been two percent, but Chase Bank recently made waves by announcing that it would raise the minimum payment requirement to four percent for many customers. The formula for calculating the minimum monthly payment is one of many important pieces of information contained in the terms and conditions of your credit card agreement.

Modification

A modification is any change to the initial agreement made between a lender and customer at the initiation of a loan. Modifications come from the lender, as it is not the customer’s place to demand modifications to a contract that they have already signed (although they certainly may request it). Modifications may concern changes to the interest rate, the minimum payment, or the credit line. There are federal and industry regulations governing the minimum disclosure time for the announcement of imminent modifications to a consumer loan agreement.

Monthly Periodic Rate

The monthly periodic rate is a little-used equation that breaks down an annual percentage / periodic rate into a monthly cost by dividing the yearly cost by twelve. The monthly periodic rate is of little practical use to consumers in the United States, since everything is determined on an annual basis.

• N

National Bank

A national bank is one that has received a charter from the federal (national) government. In the United States, national banks are member banks of the Federal Reserve System. In reality, “national bank” and “member bank” are essentially overlapping terms.

National Credit Union Association

The National Credit Union Association (NCUA) charters and oversees the workings of federal credit unions in the United States. Founded in 1970, the NCUA is a credit union parallel of the Federal Deposit Insurance Corporation. It is an independent federal agency with supervision of some ninety-two million members and assets of over eight hundred billion dollars. The NCUA backs credit union deposits through the National Credit Union Share Insurance Fund (NCUSIF), a federal fund backed by the “full faith and credit” of this nation’s federal government. The NCUA is governed by three presidentially-appointed board members, who serve terms of six years apiece. The NCUA divides the country geographically into five zones, in a similar way to the Federal Reserve Bank.

National Foundation for Consumer Credit (NFCC)

The NFCC is a non-profit independent organization that provides consumer credit counseling and education services. Agencies in partnership with the NFCC can be counted on to offer legitimate and helpful consumer credit counseling services, and are a strong resource for those consumers finding themselves overboard with debt and needing help managing their finances and making plans for the future. The NFCC is the parent agency of the Consumer Credit Counseling Service of America.

National Issuers

National issuers are banks who do business with consumers throughout the whole country in the form of credit cards. The lion’s share of all credit cards issued in the United States come from a relatively small amount of national banks, each of them household names: Bank of America, First USA, and MBNA America, for instance. The commerce of national banks is regulated by federal and industry supervisors, but is otherwise left up to the state in which the bank holds headquarters. Savvy consumers will notice that all national issuers seem to hail from the same three or four states (Delaware is a big one) – these states are those with climates very friendly to lenders, and which usually have no limits on what interest rates may be charged upon consumers. The fact that national banks can shelter themselves within lender-friendly states and continue to charge exorbitant interest rates upon consumers all over the nation has long been a bone of contention among consumer advocates, although all attempted reform efforts have, to this point, failed.

Nondischargeable Debt

Nondischargeable debt is that liability which is not wiped out through the process of a bankruptcy discharge. What exactly is classified as nondischargeable debt will vary based on the specific chapter of the Bankruptcy Code that is being invoked in the individual filing, but generally, certain kinds of tax obligations and federal student loan aid are excluded alike from being erased by bankruptcy. These are nondischargeable debts, and proof of the inaccuracy of the popular assumption that bankruptcy can make all of a person’s financial problems go away.

NSF

These three letters are among the most dreadful for a consumer to see or hear! “NSF” stands for “non-sufficient funds,” which is a politic way of saying that a check or debit/credit transaction has “bounced” and failed to clear the customer’s bank account due to there not being enough money to cover the cost. When this happens, a “NSF” fee is charged by the customer’s bank, in addition to the penalty assessed by the merchant. In the case of a NSF transaction, the bank did not advance or put forth the funds to cover the cost of the transaction – this is opposed to an overdraft fee, where the bank did in fact pay the charge and allow the account to go negative. The cost of a NSF penalty is usually the same as an overdraft charge… which is to say, WAY expensive – thirty-five to forty dollars per transaction, usually. In the case of NSF, however, the customer will also have to contend with the merchant who has not received their payment and will demand a penalty as well.

• O

Office of Comptroller of the Currency

The Office of the Comptroller of the Currency (known as the OCC to those of us who dislike tongue twisters) is the agency that oversees the business of all national banks. It is also in charge of the federal branches and agencies of foreign banks.

Offline Debit Card

Offline debit cards are the “credit” choice when a cashier asks “debit or credit.” ATM cards can only be used in debit transactions, and credit cards can obviously be used exclusively in credit transactions, but certain debit cards offer the choice for consumers to use them as either one. Offline debit transactions may also take place when a merchant’s online card acceptance mechanism has gone down for some reason. Offline debit transactions take place when a debit card bearing a Visa or MasterCard logo (which is also called a “check card”) is swiped, and run as “credit” transaction. Rather than posting instantly, as online debits do, the offline debit transaction takes anywhere from one to three days to clear the checking or savings account on which it is being drawn. An offline debit transaction involves a customer signing a slip of paper, rather than inputting their PIN at a terminal. In this way, people with offline debit cards can use “real” money in virtually all situations that credit cards are used, without the interest or fees.

Online Banking

Online banking is a term referring to the availability of certain personal finance account information and tools over the World Wide Web. The degree of accessibility and convenience afforded to consumers by internet / online banking was wholly unprecedented before the advent of widespread internet technology. For example, I can log onto the online banking section of my bank’s Web site using my user name and secret password to view my checking and savings accounts’ balances and transactions in real time, as well as to perform transfers between my accounts and access bill pay services.

Online Debit Card

An online debit card transaction deducts money from a consumer’s checking or savings account pretty much as soon as the card is utilized. These cards may have a Visa or MasterCard logo, or they may be a no-frills ATM card bearing only the logo of the issuing bank. It’s simple to tell whether a debit card transaction happened online in the United States, because the determination between online and offline is as simple as PIN versus signing a charge slip. There is no delay in the processing of an online debit card. This is excellent for those who watch their bank account like a hawk and like to check their online statement against their checkbook, but not so great for those who spend too close to the wire and might be trying (illicitly, I might add) to float the transaction for a day or two until they get paid. “Online” and “offline” do not necessarily have any bearing on the functioning of a merchant’s card processing equipment, although it is true that venders may have to resort to offline debit processing if their system goes offline (shuts down) for whatever reason.

Open-Ended Credit

“Open-ended credit” is a seldom-used term for a revolving credit line. In the United States, consumers are familiar with the type of credit / charge account that allows the borrower to make purchases up to a predetermined spending limit. This is open-ended credit, despite the counter-intuitiveness of the name.

Original Principal Balance

The original principal balance of a loan is the amount that was initially borrowed from a lender, less any fees, interest, or other charges / penalties. I have no idea why the banking industry has so many convoluted ways of saying the same thing, but that’s just the way it is!

Over (the) Limit Fee

An over-limit fee is assessed against credit cardholders when the balance on their credit card exceeds the spending limit. This can refer to overspending the limit, or the balance climbing past the limit by other means. I’ll give you an example. A consumer experiencing financial trouble might charge up their account to within a few dollars of the limit so that they can buy gas and groceries, and think that they are safe with that small buffer. However, when their bill comes in the mail, they are forced to pay it a few days late in the process of waiting for their paycheck to arrive. The late fee for the card brings the balance over the spending limit, triggering an over-limit fee. This is one of the many ways that credit card companies prey upon unsuspecting and/or financially-marginalized Americans who are pretty powerless to combat the heavily-entrenched policies of the industry.

Overdraft

An overdraft occurs when a bank customer spends more money than they have in their account. When the check or debit transaction is received and cleared by the bank, resulting in a negative balance, this is an overdraft and it triggers an overdraft fee. These fees are very pricy and can exceed thirty-five dollars apiece! Overdrafts are also called “insufficient funds” penalties. The evil kissing cousin of the overdraft is the NSF (non-sufficient funds, not to be confused with INsufficient funds!) charge, which occurs when a check presented to the bank bounces, and funds are not advanced.

Overdraft Protection

Overdraft “protection” (my emphasis) is a “service” offered to customers by banks. Through overdraft protection, a customer’s checking account is linked up to either a savings account or in-house credit card account that takes the blow if funds in the checking account prove insufficient to cover transactions made by the consumer. One might think that overdraft protection would provide total shelter from the exorbitant NSF / overdraft fees charged for those lacking the “protection,” but banks still charge a fee to make the transfer of funds from one of your accounts to another! The transfer fee is charged per transaction, and quickly becomes very expensive… just the way that “unprotected” overdrafts do. The fee is a bit less, but I still find the term “protection” ironic in a situation where customers are still being charged for the use of their own money. I looked up the cost of an overdraft protection transfer from savings to checking in linked-up accounts at the bank that I use, and it’s ten dollars. That’s still better than the thirty-five dollars that I discovered they charge per NSF or overdraft charge, but still pretty ludicrous.