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Automatic Deposit: A regularly scheduled electronic deposit to an account, most commonly a payroll check. Also called a direct deposit.
Automatic Withdrawal: A regularly scheduled electronic withdrawal from an account, most often utilized with monthly bill payment systems.
Balance: The remaining amount due on a loan, combining principal and interest.
Bankruptcy: A legally declared inability to repay creditors filed in Federal Court that will adversely affect your credit rating for up to 10 years. There are different types of bankruptcy depending on the amount and type of debt involved.
Beneficiary: A person named to inherit funds from investments and insurance policies.
Billing Cycle: The amount of time — typically one month — between payments on a loan or revolving account.
Billing Statement: A monthly accounting that summarizes total balance owed, payment due, interest paid and the payment due date.
Borrower: An individual who acquires a loan through a credit agency and agrees to pay the loan back under specific terms.
Bounced Check: A check returned by a financial institution due to insufficient funds.
Breach of Contract: When one party fails to meet the agreed upon terms of a contract. This is also known as a “default.”
Cancellation of Debt: When a lender releases a borrower from payment obligations. This may have an adverse effect on the borrower’s credit.
Cardholder Agreement: Required written terms that explain the limitations on a credit card including credit limits, terms of payment, additional fees and interest rates.
Cash Advance: Money acquired based on a credit account. Many credit cards allow cash advances but often charge a higher rate of interest.
Cashier’s Check: A check drawn on a bank that guarantees payment. Some banks charge clients a fee for this type of check.
Certificate of Deposit (CD): A CD is a financial investment with a pre-fixed yield, meaning interest is determined when the CD is established. Bank rates may vary somewhat to entice investors, but typically the yield on a CD is lower than the current interest rate on loans so the bank can make a profit.
Certified Check: A guaranteed check by a bank that almost always requires paying a fee.
Checking Account: While many checking accounts don’t yield interest, more and more financial institutions are offering interest bearing accounts. Typically, to earn interest, a minimum balance must be kept at all times.
Co-signer: This individual agrees to make payments if the primary borrower defaults. Co-signers are often used when a borrower doesn’t have the credit standing to borrow alone.
Collateral: An asset that guarantees repayment of a loan which could include a vehicle, home or land.
Collection Agency: A company that attempts to collect delinquent loan payments for client loan organizations.
Consolidation Loan: A combining of several different debts to create one monthly payment, typically more affordable and sometimes with a lower interest rate overall.
Consumer Credit Counseling: An organization that assists debtors in establishing a healthier financial picture. Typically, the focus is on establishing a workable budget and developing a reasonable debt repayment plan.
Credit: Promise to pay back the value of something purchased without initial full payment. A contract or credit agreement is utilized to describe the terms including time to pay, monthly payment date, interest rates and possible fees.
Credit Bureau: A company that compiles credit information about the financial practices of individuals and businesses. This information may be purchased to determine creditworthiness.
Credit History: Documentation of a person’s debt payment history including debts paid in full, outstanding debt and issues with debt payment, such as repossession and bankruptcy.
Credit Limit: The amount of credit typically attached to a revolving credit card account or a line of credit.
Credit Monitoring Service: A company that continually monitors credit status for individuals and businesses, alerting them to any negative discrepancies and suspicious uses of their name, social security number or credit.
Credit Score: A number that reflects a person’s credit history, most often utilized to determine interest rates and loan terms on an individual basis. A higher credit score allows for lower rates and larger loans.
Credit Union: Credit union is a nonprofit organization that offers financial services similar to a bank’s, but the ownership of the company is shared by its members. Belonging to a particular group or working for a qualifying company is the requirement to join a credit union.
Date of Maturity: The final payment date for a loan.
Debit Card: Used similarly to a credit card to make purchases, but the amount of the purchase is automatically deducted from a specific checking or savings account. A debit card may also be used at an ATM for various transactions.
Deferment: Postpones a payment and extends the life of the loan with or without extra interest. Auto loan companies usually offer the option several times during the life of a loan. Student loans typically defer payments until 6 months after a student has graduated.
Discharge of Bankruptcy: A court order that clears a bankruptcy case.
Diversification: A conservative way of investing in multiple forms to balance out high-risk to low-risk investments so the overall risk is less.
Electronic Check: Operating like a personal check, an Echeck is submitted electronically to a financial institution. This type of check allows for online and phone payments without a physical check.
Emergency Fund: Money set aside for unexpected financial situations. Most financial experts recommend saving three to six months of income in an easily liquidated, interest bearing account.
Estate planning: Established through an attorney, an overall plan for distribution of material property and money to an heir or heirs.
FDIC: The Federal Deposit Insurance Corporation is an independent agent of the federal government. This organization ensures that your money is protected, up to $250,000, should a bank fail. Since 1934, when the FDIC was established, no depositor has lost insured funds.
Finance Charge: Fees assessed on monthly credit card statements including interest, late fees and other transaction-related amounts.
Garnishment: Money taken from a payroll check and given to a creditor. The IRS often garnishes wages for back taxes.
Interest Rate: The percentage of payment, in addition to the principal, for the use of credit or for a loan.
Installment Contract: An agreement in which the buyer pays in a series of payments.
Late Charge: A fee assessed for making a late payment.
Lease: Payments made for the use of something rather than the outright purchase of it, which is most commonly a car or a home. A lease agreement notes the terms of the lease including deposits, time limits, payments and fees.
Minimum Balance: The amount of money required to be kept in an account to earn a particular interest rate or avoid fees.
Minimum Payment: On a revolving charge account, the smallest acceptable amount of payment. This payment may only cover the interest without reducing the principal preventing debt reduction.
Money Market Account: An interest bearing account insured by the FDIC that is limited but liquid by allowing a maximum of six monthly withdrawals.
Mutual Fund: A professionally managed portfolio that allows individual investors to choose from a variety of diverse options to create one overall investment. All gains or losses are shared by the investors.
Net Income: Amount of income remaining after taxes.
Online Banking: The ability to view and manage accounts using the Internet.
Online Bill Pay: A banking service that allows a person to set up payments for bills to be electronically deducted from specific accounts on a regular basis using electronic checks.
Overdraft: When there are insufficient funds in an account to cover withdrawals or outstanding checks, a fee is assessed. Most financial institutions offer overdraft protection in the form of another account, such as savings, or a line of credit.
Passbook Savings Account: Typically a low-yield account, this savings account allows for deposits only, with no check writing privileges. It is covered by the FDIC.
Periodic Interest Rate: A rate of interest applied to a loan or credit card that is calculated for a time period other than a year, such as weekly, monthly or even daily.
Personal Loan: Loans given without collateral, usually with high-interest rates and short-time limits for payment.
Pre-approved: The credit user is already qualified for a credit card or line of credit.
Principal: The amount of a loan not including fees or interest.
Revolving Line of Credit: A financial situation where the lender approves a borrower for specific amount and the borrower may continue borrowing as long as the credit limit is not exceeded.
Roth 401(k): An employer sponsored savings plan that combines standard 401(k) components with a Roth IRA.
Roth IRA: A retirement savings account where contributions are made with after-tax money. Earnings and withdrawals are tax free. An account must be five years old before withdrawals are made, and the account holder must be 59.5 years old before withdrawing without penalty.
Savings Account: Most banks offer a tier of savings account options based on the amount of money deposited and maintained, other investment tools you might have with the bank and your checking account status. Savings accounts generally yield the smallest amount of profit of the interest bearing accounts.
Signature Loan: An unsecured personal loan based on a borrower’s credit history.
Treasury Bill: also known as a treasury note, this short-term investment is backed by the U.S. government and sold at a discounted price, so the value of the note increases as the maturity date draws near.
With Approved Credit (WAC): A requirement noted by a company stating that a buyer must meet certain credit standards.