Wonga Jargon Buster: C-D
CAB
CAB stands for the Citizen’s Advice Bureau, which helps people resolve their legal, financial and other problems by providing free, independent and confidential advice. It’s an organisation that’s part charity and part government-funded. Every Citizens Advice Bureau is a registered charity, is staffed by trained volunteers and funded mainly by government grants to provide these services for local communities.
Capital
Capital is often used to describe a large amount of money used for generating more wealth, such as capital invested to start a new business. It doesn't include the income or profit you get from an investment, nor the interest you have to pay on any loan or mortgage.
Cash advance
A cash advance is money provided against a prearranged line of credit such as a credit card or a loan agreement. The phrase might be used to describe a small loan made over a short period of time, compared to traditional loans which are usually taken for a year or more and can even be repaid over several decades in the case of mortgages. Wonga provides cash advances, 24/7.
Cashback mortgages
They are becoming a rare thing these days, but cash-back mortgages are a type of mortgage product where the provider lends money for the mortgage plus an additional lump sum. The cash is either given as a discount on the mortgage, or added to the balance to be repaid over time. The cash can be used to pay for building work for example.
Cash flow
Cash flow, or net cash flow, is the balance of cash being received and paid by an individual or business. It is often measured during a defined period of time and can be used to determine problems with liquidity. In other words, a company can fail because of a shortage of incoming cash even while it is profitable. Similarly, an individual can get into arrears, even though their income is more than his expenditure.
CCCS
The Consumer Credit Counseling Service (CCCS) is a registered charity whose purpose is to assist people who are in financial difficulty by providing free, independent, impartial and realistic advice. The Foundation for Credit Counseling, based in Leeds, is the umbrella charity for the CCCS, which has a free national telephone service, ten regional centres and an online service.
CCJ
If you are in arrears, a creditor can take a County Court action against you, to claim the money back via the courts. If you pay the amount outstanding, you can avoid a hearing or judgment. Otherwise there would be a simple hearing in private, for the court to look at the facts and decide whether you owe any money. If the answer is yes, they will also decide how you should repay it and this ruling is a County Court Judgment or CCJ. Under Scottish law claims are dealt with differently, by the Sheriff Court.
CHAPS
CHAPS stands for Clearing House Automated Payment System. It enables payments to be transferred from one bank account to another on the same day - if they instruction is made before 3pm on a week day.
Charge card
A charge card looks like a credit card and allows you to spend money in pretty much the same way as a credit card. However, you must settle the debt in full each month rather than having the option of a minimum payment. Most charge card providers will operate penalty interest charges which are significantly higher than credit card interest rates if you fail to pay on time.
Charges
This is the money paid to financial institutions for the services provided. Penalty charges are also applied if services are misused or terms are broken. Penalty charges can include unauthorised overdrafts, bounced cheques and late payment fees.
Cheque cashing
If you have a cheque to cash, but don't want to wait for the bank to clear it, or you have a chequebook and simply want to borrow some money until payday, then a cheque cashing outlet will charge you a fee and provide the cash up-front. Compared to Wonga these shops are not very convenient or flexible, but they will often lend to people who might otherwise struggle to gain credit elsewhere. If you do use such a service you should be careful not to keep putting off repayment from month to month, as the fees will quickly mount.
Chip and PIN
Chip and PIN is a payment system designed to reduce card fraud. A chip and PIN card has a 'smart' chip that holds your four-digit Personal Identification Number (PIN). When you pay in a shop with a chip and PIN card, you are asked to enter your PIN into a keypad instead of signing a receipt. This PIN can also be used at cash machines to withdraw money.
Cleared balance/Cleared funds
These terms refer to types of credit - cash, cheques, electronic payments and overdraft funds - that have completed the clearing cycle and are therefore ready to access. In other words, you can only withdraw or transfer money to another account with money from your cleared balance. The cleared balance is updated during the day as payments go in and out of your account.
Clearing cycle
The process that cheques or electronic payments go through when paid into your account. Depending on the type of credit, the clearing cycle takes different lengths of time. For example, BACS and cheques take up to three days. CHAPS is a same-day payment (if made prior to 3pm).
Credit card
A plastic card that allows you to borrow money, up to your credit limit, to pay for goods and services from most companies. Credit cards can offer good value if the balance is repaid on time each month. If you don’t always pay off the amount outstanding (and just make the minimum required payments), the balance can easily spiral out of control and become harder to settle completely. There are hundreds of credit cards available and you should always do your research before deciding to apply for one.
Consumer Credit Act
The Consumer Credit Act 1974 requires most businesses which offer goods or services on credit, or which lend money to consumers, to be licensed by the Office of Fair Trading (OFT). Trading without a licensing arrangement is a criminal offence and can result in a fine and/or imprisonment. Not all lenders are regulated, however, and these people are sometimes referred to as loan sharks.
Credit Crunch
A credit crunch, or credit squeeze, is a popular phrase used to describe a sudden reduction in the general availability of credit. It can also refer to a sudden increase in the cost of obtaining loans from banks, although both scenarios usually occur together. There are a whole range of reasons why lenders may suddenly increase the costs of borrowing, or tighten the requirements for applicants. For example, it may be due to an anticipated decline in the value of the collateral used by the banks when issuing loans, such as falling property prices, or even an increased perception of risk regarding the solvency of other banks within the banking system. It may also be due to a change in monetary conditions, such as if the central bank suddenly and unexpectedly raises interest rates or reserve requirements.
Credit balance
The amount of money in your account when you are in the black (a positive balance).
Credit limit
Your credit limit is the maximum amount of money that you can borrow. This is set by the lender making an offer of credit to you. At Wonga we use a trust rating system that means your credit limit will be unique to you and will change according to how you use our service.
Credit rating
A credit rating assesses the credit ‘worthiness’ of an individual, corporation, or even a country. Credit ratings, also known as credit scores, are calculated from a number of factors including financial history and current assets and liabilities. Typically, a credit rating tells a lender or investor the probability of the subject being able to pay back a loan. A poor credit rating therefore indicates a high risk of defaulting on a loan, and thus leads to higher interest rates being charged, or the refusal of an application. Wonga's website provides helpful information on credit history and borrowing advice.
Credit reference agency
A credit reference agency (called a credit bureau in the United States) is a company that collects information from various sources and provides information on individual consumers for a variety of uses. This information, sometimes in the form of a credit rating (see above), helps lenders assess credit worthiness and the likely ability of someone to pay back a loan. Based on this information, lenders may refuse applications or decide appropriate interest rates for example. Some lenders charge different rates based on risk-based pricing, a form of price discrimination based on the different expected risks of different borrowers, as determined by their credit rating. Wonga charges the same simple fee structure for all applicants. Examples of credit reference agencies in the UK are Callcredit, Experian and Equifax.
Credit report
A credit report is usually a document that summarises your credit history. The information is gathered and updated by organisations like credit reference agencies, banks, debt collecting agencies and retailers. It can include details of your borrowing, applications for credit, court judgments and bill payment behaviour. These reports are bought by companies to help assess applications for credit. You can get a copy of your own credit report from the credit reference agencies.
Debit card
When you pay for items or services by debit card, the money is taken directly from your bank account within a day or two of the transaction. There’s no credit involved unless you are spending on an overdraft facility.
Debt
Money owed to a person or company. You can get more advice on debt matters on our website.
Direct debit (DD)
An instruction from you to your bank or building society that allows someone else to take money from your account. The amount of cash taken can vary, but you must be told of the amounts and relevant dates before the money is removed. Direct debits allow you to pay regular bills automatically for example.
Debt consolidation
Debt consolidation usually involves taking out one large loan to pay off a number of other, smaller commitments. This is often done to secure a lower interest rate, or for the convenience of having only one loan to think about repaying. It often involves converting a number of unsecured loans into one secured loan that’s tied to an asset (eg. a house or car). Having collateral with which to secure a loan generally means lower interest rates because it reduces the risk to the lender.
Discounted rate
A variable interest rate that is set at a fixed percentage amount below the lender's standard variable rate for a defined period of time. At the end of the discounted period, the interest rate reverts to the lender's standard variable rate.
Doorstep loan
A doorstep loan is a personal, unsecured loan which is delivered by a local agent, literally to your doorstep. The sums of cash involved are usually relatively low but the amount of interest charged is typically a lot higher than with a bank loan or credit card for example. Repayments are also collected via visits to your house.