Glossary of Financial Terms

  • Affinity Credit Card- A credit card that is branded by two organizations. One is a credit card issuer and the other is a company or brand name. For example Citibank sponsors/offers the SONY credit card.
  • Annual Fee- The charge imposed yearly to use a specific credit card.
  • Annual Percentage Rate (APR): The yearly cost of carrying a balance on a credit line
  • Annual fee- Any fee that is charged on a yearly basis. Only some credit card companies apply this fee to their credit card holders, simply for having the credit card. This fee is charged regardless of amount or financial value.
  • Available Credit: The amount of a credit line that has not been used. Available credit equals the "credit limit" minus the "current balance."
  • ATM: Automated Teller Machine. This machine uses a computer that verifies your account information and PIN (Personal Identification Number) and will dispense or deposit funds per your request.
  • 401(k) Plan- A retirement savings plan established by an employer in which employees set aside a percentage of pay in an account that earns interest. 403(b) Plan: A retirement savings plan similar to a 401(k), but exclusively for employees of public schools and certain tax-exempt organizations.
  • 529 College Savings Plan- An education savings plan operated by a state or educational institution. It is designed to help families set aside funds to pay for future college costs.
  • Annual percentage rate (APR)- APR allows you to evaluate the cost of the loan in terms of a percentage. If your loan has a 10% rate, you'll pay $10 per $100 you borrow annually.
  • Annual percentage yield (APY)- The effective, or true, annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the effect of compounding. The APY is calculated by taking one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate has an APY of 12.68% (1.01^12).
  • Annual Fee- The amount that credit card companies charge for the use of a credit card.
  • Asset- Any possession that has value in an exchange. For example, cash, stocks, bonds, real estate and personal possessions.
  • Balance- The amount of money that you have in a specified account.
  • Bad Credit- Means exactly that, BAD CREDIT. Officially means a poor credit rating. Bad Credit comes about from making late payments, missing payments, exceeding card limits or filing for bankruptcy.
  • Balance- The total amount of money owed on a credit line. It includes any unpaid balance from the previous months, new purchases, cash advances and any charges.
  • Balance Transfer- Moving the debt, or balance, from one credit card company to another. Often done to achieve a lower APR.
  • Bankruptcy- Legal filing with a court of a person's or company's inability to repay debts. Bankruptcy is a LAST RESORT. It kills credit ratings and remains on credit reports for 10 years. Federal student loans, Federal income tax debt and Child support are all exempt from bankruptcy protection laws.
  • Billing Cycle: The total # of days between the last due date and the current due date on a credit card statement.
  • Billing Statement: A monthly bill from a creditor which summarizes the activity and expenses on an account.
  • Budget: A plan of incoming and outgoing monies. Expense and Income.
  • Cardholder Agreement: The issuer's written statement of terms and conditions relating to a credit card account. The cardholder agreement is required by Federal Reserve regulations. The agreement states the annual percentage rate, the monthly minimum payment formula, annual fee, if applicable, and the cardholder's rights in billing disputes.
  • Cash Advance: An instant loan from a credit card account. The Card Company will charge interest from the day the advance is taken until the day it is paid off. A transaction fee may also be charged based on the amount of the withdrawal.
  • Cash Advance Fee: A one-time fee for cash advances in addition to normal interest charges.
  • Charge Card: A card that requires full payment of the balance by the due date. It is not a line of credit and interest is not charged. An example is The American Express Card. The entire balance of what you have charged on the card the past month is due in full when the monthly bill comes in.
  • Co-Signer: A person who signs a loan or credit card agreement with the primary applicant. The co-signer is responsible for repaying the balance of the loan or debt in the event that the applicant does not.
  • Credit Card Debt: The unpaid balance on al credit card. This is not the minimum amount due, but is the total balance due on a respective line of credit.
  • Credit History: An official record detailing how people manage their debts. This information is collected by the three major credit reporting agencies and includes everything from one's Social Security number, current and prior addresses, detailed status of all credit lines or loans and employment info. A bankruptcy also appears in your credit history if filed within the past 10years. Information in your credit history is the determining factor in qualifying or disqualifying you from obtaining credit lines, home mortgages, loans, leases, and sometimes even employment.
  • Credit Limit: The maximum amount that a person is allowed to owe on a credit card. It includes purchases, cash advances, and any finance charges.
  • Credit Line: The amount of revolving credit. Any amount up to the limit of the line of credit may be "borrowed." The cost of purchases or cash advances, plus the interest charges, is paid off over a period of time. We recommend you pay of your entire balance of the credit line each month as this is the best way to build a positive credit history while increasing your credit line. If you do pay the outstanding balance over time, the credit line becomes available again for usage.
  • Check Register: Your check register is a tool for keeping track of your account balance. A check register is like a diary where you write down what money went in and out of your account.
  • Checking Account- Main purpose is to use money, Withdraw money, Zero or very low interest-bearing, Used for transactions, transactions are usually unlimited. Intended for daily use, Use checks and an ATM/debit card to use and access your money, Must be 18 or older to create a checking account
  • Check Card: A card that you can use like a credit account. card to pay for things directly from your checking
  • Credit Union: A credit union is a member-owned, not-for-profit, cooperative financial institution owned and operated by its members.
  • Debit Card: NOT a credit card. It is a card tied in to your bank account that allows purchases to be made with currently available funds that are instantly deducted from your respective financial account (usually your checking account.)
  • Debt: The total amount of $ a person owes to banks and creditors.
  • Default: The failure to repay a line of credit or loan according to the legal agreed terms and conditions. If you default on a line of credit or loan, the creditor/bank can sue in a court of law to ask the court to essentially force the person to pay off the entire debt balance.
  • Deferred Payment: Payments which are put off to a future date or extended over a certain period of time. Interest usually accumulates during a deferment. Federal Student Loans come with deferment options and many borrowers often elect to defer these student loan without interest penality.
  • Delinquent Account: A credit line or loan account where late payments have been received or the payments have not been made according to the respective terms and conditions.
  • Due Date: The day in which a payment must be received by creditor. After that date late fees are often charged, and late payments are often reported to the 3 major credit reporting agencies.
  • Deposit: A check or cash that is put into your bank account. Endorse: To sign the back of your check before cashing or depositing it, as proof that you are the person the check was written out to.
  • Finance Charges: The total $ amount paid to use a credit line, including interest, service and/or transaction fees.
  • EE/E Savings Bonds are a secure savings product that pay interest based on current market rates for up to 30 years. Electronic EE Savings Bonds are sold at face value in TreasuryDirect.


  • Finance Company: A company or business that offers lines of credit and loans to consumers.
  • Fixed Expenses: Expenses such as mortgages, rent, student loan payments or car payments. These expenses really can't be changed and are re-occurring each month.
  • Fixed Interest Rate: An interest rate that does not change. It can only change if the credit issuer notifies the cardholder through an amended cardholder agreement.
  • Forbearance: A way of postponing repayments due to an "economic hardship." The lender/creditor sets forth the terms of a forbearance. Typically, interest does accrue during a forbearance period.
  • Grace Period: If there is NOT an outstanding balance a line of credit a grace period is the interest-free period of time between the date of purchase and when that purchase actually appears on the credit card statement. Note that a "grace period" is not the number of days after the due date during which a person can make a payment without being charged a late fee from the credit card company. Payments must always be received on or before the indicated due date on the actual statement.
  • Household Income: The total amount of income of all the members in a household. It includes wages and salary, bonuses and commissions, child support, parental support, Social Security, retirement funds, unemployment, disability funds, and dividends.
  • Individual Credit: Credit based on all of your incomes, assets and credit history.
  • Installment Loan: A loan that a person promises to pay back in fixed, scheduled payments over a specific period of time. In addition to the original amount borrowed, interest is paid - a fee for the use of the lender's money. Student loans, home equity loans and auto loans are usually installment loans.
  • Interest Rate: A fee that is charged for money lent from a creditor.
  • Interest: The price paid for the use of borrowed money and money earned by deposited funds
  • Interest rate: The percentage of a sum of money charged for its use
  • I Savings Bonds are a low-risk savings product that earn interest while protecting you from inflation. Sold at face value
  • Joint Credit: Credit based on the total income, assets and credit histories of both people who are applying. Spouses combining resources may be able to get a higher line of credit. When a parent co-signs for their child's student credit card, it increases both the chance of that student getting the card as well as receiving a higher credit limit. It also means that both parties ( student and parent man and wife) are responsible for paying off the credit debt. If one person fails to pay on a joint credit account, the creditor can demand payment from the other person who signed, even if you are separated or divorced.
  • Late Payment: A payment that is "received" after the due date on the statement.
  • Late Payment Fee: Fee charged when a payment is "received" after the due date.
  • Legal Judgment: A court decision that requires a person to do something, such as pay off a debt to a creditor.
  • Liability: Anything that is owed and must be repaid at some point in the future. A liability may be due immediately (such as an electric bill) or may be more long term and be paid off over several months or years (such as a mortgage or student loan). The opposite of a liability is an Asset.
  • Minimum Monthly Payment/Amount Due:The smallest amount that can be paid by the due date and still meet the terms of the cardholder agreement. See also Balance/Amount I Owe.
  • Monthly Statement: At the end of each month, you’ll receive a statement of your account’s activity (what went in and what came out) from the previous month. You can use the statement to balance your account by comparing it to your check register records. After all transactions have been recorded in both places, the balances should match. If they don’t match, use your saved receipts to find the error.
  • Outstanding Balance: The total amount owed on a credit card or other loan.
  • Over-the-Credit-Limit: When the amount owed is greater than the limit on a credit line. Any combination of purchases, cash advances, fees or finance charges may cause an individual to exceed their credit limit.
  • Over-the-Limit Fee: A fee charged for exceeding the total credit limit on a credit card or line of credit.
  • Overdraw: To write a check for more money than what you have in your account. Usually there is a fee (known as NSF/non-sufficient funds) from your financial institution associated with overdrawing your account.
  • Overdraft Fee: An overdraft occurs when withdrawals from a bank account exceed the available balance. Most banks charge a 30 to 35 dollar fee as punishment for exceeding your available balance.
  • Overdraft Protection: Automatically transfers available funds from your savings account, second checking account, credit card, or other line of credit to your checking account if you overdraw .
  • Periodic Rate: The interest rate described in relation to a specific amount of time. For example, the monthly periodic rate is the cost of credit per month; the daily periodic rate is the cost of credit per day.
  • Posting Date: The date that a purchase, cash advance or payment is actually recorded on an account. Usually within 48 hours of the creditor receiving payment.
  • Pre-payment: When a portion or the entire amount of the principal of a credit line or loan is paid before it is due in full. This often reduces the total amount of interest paid on a credit line or loan.
  • Previous Balance: The total balance that is due at the end of the PREVIOUS billing cycle.
  • Prime Rate: Interest rate that is monitored by the Federal Reserve. It is the base interest rate on "corporate loans" posted by at least 75% of the 30 largest banks in the United States.
  • Principal: The portion of a loan that represents the actual amount of money borrowed. It does not include interest. With credit cards, the "principal" represents the "price of purchased items" or the actual amount of the cash advance.
  • Promissory Note: A legal document a person signs to obtain a loan or line of credit. It lists terms and agreements of the loan, including how and when the loan will be repaid.
  • Quarterly:Four times a year (Every 4 months).
  • Revolving Credit: A credit agreement that allows consumers to pay all or part of the outstanding balance on a loan or credit card. As the balance is paid off, credit becomes available again to use for another purchase or cash advance.
  • Savings Account: Main purpose is to save money, Make deposits, Interest bearing, Transactions are limited, not intended for daily use, Can’t use checks or debit cards, Can open an account before the age of 18 (usually signed on with a parent), If you have extra money in your checking account, put it in your savings account so it can accumulate interest.
  • Subsidized-federally guaranteed loans that are not based on financial need. Interest does accrue from the time the loan is disbursed to the school. Additionally, there are maximum amounts you can receive per school year for dependent and independent students.
  • Secured Card: A credit card that is "guaranteed" by a cash deposit which held in a special savings account or c.d.. The credit line on the secured card often equals the amount of the deposit. If a cardholder defaults on payments, the card issuer will apply the deposit toward the outstanding balance due.
  • Secured Debt: Debt for which repayment is guaranteed through collateral - property of equal or greater value than the amount of the loan. If the loan is not repaid, the issuer may take possession of the collateral. Collateral may be an asset such as a car or a home or, in the case of a secured credit card, a cash deposit held by the issuer. For example, a mortgage is a secured debt in which the home is collateral. If the person fails to repay the loan, the bank may take the home as payment.
  • Semi-Annually: Twice a year (Every 6 months).
  • Transaction Date: The actual date when something is purchased or when cash is withdrawn.
  • Unsecured Credit Card, Unsecured Debt: Debt that is not guaranteed by any collateral. No assets are committed in the event of a loan or credit default. If the creditor/loan issuer is unable to collect its value is lost. Most credit cards are unsecured.
  • Unsubsidized- federally guaranteed loans based on financial need. Interest does not accrue on the loan while you are in school at least half time, or during any future deferment periods. The federal government "subsidizes" (or pays) the interest during these times. Additionally, there are maximum amounts you can receive per school year.
  • Variable Expenses: Expenses that can change from month to month, including but not limited to necessities that can be decreased (food and utilities) and non-essentials that can be eliminated (cel phones, long distance, cable, dsl service, subscriptions, etc). Reducing variable expenses is a good first step in getting control of your finances.
  • Variable Interest Rate: An interest rate that changes, usually based on the "prime rate." Variable rate credit cards often have an interest rate like "prime + 5.9%," which means the interest on the card is "prime rate" plus an additional 5.9%.
  • Withdrawal: To take money out of your bank account. To make a withdrawal is the opposite of making a deposit.
  • Work study- an educational plan in which students alternate between paid employment and formal study
  • Zero Balance:When the total outstanding balance of a credit line is paid in full. It means NO money is owed to the credit card company.

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More Resources For Financial Terms

  • Checking vs.Savings
  • College
  • Credit Cards