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Glossary of debt and savings terms

10. Consumer Credit Protection Act -- Passed in 1968, this legislation spelled out basic consumer protections, including Truth in Lending disclosures. It requires creditors to state the cost of borrowing in understandable terms to allow consumers to figure out how much loans would cost.

11. Credit limit -- The maximum amount a card allows a customer to borrow.

12. Debt-to-income ratio -- The percentage of before-tax earnings spent to pay off loans for obligations, such as auto loans, student loans and credit card balances. Lenders look at two ratios. The front-end ratio is the percentage of monthly before-tax earnings spent on house payments (including principal, interest, taxes and insurance). In the back-end ratio, the borrower's other debts are factored into the ratio.

13. Fair Credit Billing Act -- Passed by Congress in 1975 to help customers resolve billing disputes with card issuers. The act requires issuers to credit payments to a customer's account the day they are received. However, each issuer is allowed to set specific payment guidelines. If any of the guidelines are not met, the issuer can take as many as five days to credit the payment. To be protected under the law, customers who discover a billing error must write to the issuer within 60 days of the mailing date on the bill with the error. The issuer is then required to investigate and either correct the mistake or explain why the bill is correct, and to do so within two billing cycles. The issuer also must acknowledge a customer's complaint in writing within 30 days.

14. Fair Credit Reporting Act -- A federal law that governs what credit bureaus can report and for how long. It outlines procedures for correcting errors in credit reports. It also requires credit bureaus to issue copies of consumers' credit reports upon request.

15. Fair Debt Collection Practices Act -- A federal law that prohibits certain debt collection methods and tactics, such as harassment.

16. Finance charge -- The charge for using a credit card, comprised of interest costs and other fees, including finance charges for cash advances and balance transfers. Most credit card issuers use the single-cycle average daily balance method to calculate finance charges. Some, however, may use the double-billing cycle.

17. Grace period -- The interest-free time some lenders allow between the transaction date and the billing date. It is sometimes -- but not always -- granted when the credit card user does not carry a balance, and typically lasts between 20 and 30 days. If no grace period exists, finance charges accrue the moment a purchase is made with the credit card. People who carry a balance on their credit cards have no grace period.

18. Gross income -- All the money, goods and property an individual receives during the year before it is reduced through adjustments, deductions and exemptions. People who use the barter system have to include the value of whatever they've received in exchanged for services as part of their gross income.

-- Posted: Feb. 25, 2008
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