Interest-Crediting Methods

Definition

• The method used to determine how interest is accrued, owed, and eventually dispersed to investors or the party due. Insurers use in excess of 35 interest-crediting methods including, but not limited to, point-to-point, yield spread, annual reset, averaging, or high water mark.

Synonyms
crediting method, determining accrued interest, method of crediting interest

Related Terms and Acronyms

• Accounting Method — Definition,
  • The method used by a business or individual to keep records. Most individuals and small businesses use the cash method, although businesses that maintain inventory are required to use the accrual method. See also "Accrual Method" or "Cash Method."
• Accrue — Definition,
  • To gather together an amount often over a period of time.
• Accrued Interest — Definition,
  • Interest which has already been earned but has not yet been paid.
• Annual Percentage Rate (APR) — Acronym, Very Important,
  • A yearly rate of interest that includes fees and costs paid to acquire the loan. Lenders are required by law to disclose the APR. The rate is calculated in a standard way, taking the average compound interest rate over the term of the loan, so borrowers can compare loans. In mortgages, it is the interest rate of a mortgage when taking into account the interest, mortgage insurance, and certain closing costs including points paid at closing. There is no APR in an automobile lease; instead, the cost of money is expressed as the money factor.
  ➥ A number used to compare costs associated with mortgage loans and other forms of financing.
• Credit Card (CC) — Acronym, Very Important,
  • A plastic card with a coded magnetic stripe that, when signed, entitles its bearer to a revolving line of credit, with a credit limit and interest rate determined by the borrower's income and credit report.
  ➥ A payment card that gives customers access to a revolving line of credit.
• Debt — Definition,
  • Money one person or firm owes to another person or firm.
• Interest (IN, int) — Acronym & Abbreviation,
  • Money paid for the use of borrowed funds, usually expressed as an annual percentage.
  ➥ Bank account transaction code.
• Interest Factor — Definition,
  • The decimal equivalent for an interest rate on a unit amount for a period of time. Computed by interest rate divided by number of days in a basic year times the number of days accrued.
• Interest Rate (IR) — Acronym, Very Important,
  • The rate a lender charges an individual to borrow money.
• Line of Credit (LOC) — Acronym,
  • A commitment by a financial institution to lend up to a specified maximum amount to a customer during a specified period of time.
• Loan — Definition,
  • Letting another party use something of value temporarily.
• Mortgage (mtg) — Abbreviation, Important,
  • A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.