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Financial Education

Glossary of financial terms

A

  • Adjustable Rate Mortgage:
    A mortgage that offers afixed initial interest rate and a fixed monthly payment over a short-term introductory period. The interest rate and term of the the mortgage adjust to a new rate after the introductory period is over and will continue to adjust over the life of the loan.

  • Adware:
    Software that displays advertisements on your computer.

  • Alternative:
    A different choice or option that can be taken for a given situation.

  • ATM Card:
    A plastic card with a mangnetically coded strip that helps a customer access their money at any time through an automated teller machine (ATM). A card holder may also conduct simple banking transactions such as

  • Automated Banking:
    Products and services that allow a customer to access their accounts 24 hours a day, 7 days a week, to complete transactions with assurance of technology (computer, telephone, mobile phone or automated machine). Examples of transactions available through automated banking may include online and mobile banking, bill payment services and electronic transfers.

  • Automated Teller Machine (ATM):
    A machine that allows customers to access their bank account through a debit or ATM card to conduct banking transactions such as withdrawals and deposits. ATMs are located at most banks as well as high traffic areas such as malls and shopping centers. 

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B

  • Balance:
    1). The amount of money within a bank account. 2) The remaining or unpaid portion of a bill or debt.

  • Bank:
    A business that safely keeps money for customers, makes personal and commercial loans, and provides other financial services and is insured by the Federal Deposit Insurance Corporation (FDIC), as defined by the Bank Holding Company Act.

  • Budget:
    A plan that helps you track and manage necessary and unnecessary expenses to keep spending within your limits and create opportunity to build your savings.

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C

  • Capacity:
    One of the 3C’s of Credit. A lender’s need to confirm that you can repay the amount of the original loan plus the interest on the loan. The 3C’s of credit are: capacity, character and collateral.

  • Cent:
    A penny. One hundred cents equal a dollar.

  • Certificate of Deposit (CD):
    A savings product that requires you to invest your money for a pre-determined length of time and guarantees the same rate of return (interest) for that same length of time. CDs usually have requirements in addition to the length of the investment, such as a minimum deposit. CDs often pay an interest rate slightly higher than a savings account. If you break the commitment by withdrawing your money before the end of the period, you may be required to pay a penalty.

  • Character:
    One of the 3C’s of Credit. Moral or ethical quality. Character is often evaluated by a lender to confirm whether or not you are someone the bank should engage in business with. The 3C’s of credit are: capacity, character and collateral.

  • Check:
    A written request that allows you to withdraw a specified amount of money from your account to give to a company or individual listed on the check.

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    Check Register:
    A ledger within your checkbook to write down all of your account transactions and therefore manage your balance.

     

  • Checking Account:
    A bank account from which money may be deposited or withdrawn by the account holder as needed.

  • Choice:
    The act of choosing between two or more things, ideas, or actions.

  • Closing Costs:
    Money that is owed to the bank or lender to cover the cost of necessary services to complete the sale of a home. This sum is typically paid at the end of the home buying process or closing.

  • Coins:
    Currency or legal tender in the form of pennies, nickels, dimes, quarters, and half-dollars.

  • Collateral:
    One of the 3C’s of Credit. A borrower’s personal property, something of a monetary value, pledged to a lender as a source of repayment should the borrower not be able to pay back the loan. The 3C’s of credit are: capacity, character and collateral.

  • Compound Interest:
    When interest is calculated based on the rate of interest applied to just the deposit for a specific period of time and then in subsequent periods is applied to the principal deposit and previously earned interest.

  • Consumption:
    The purchase or use of a product or service by a consumer.

  • Cost:
    (1). The price paid for a particular service or item. (2) The expenditure of something, such as time or labor, necessary for the attainment of a goal.

  • Credit:
    Trust by a lender to allow a consumer to buy something now and pay for it later. A promise is made to the lender that you will pay back the initial balance within a specified period of time or pay interest on the amount used for the purchase. The act of borrowing or having money advanced at the price of the interest rate.

  • Credit Bureau:
    An agency that gathers and maintains information on the debts and repayment records of individuals and businesses.

  • Credit Card:
    A plastic card that enables the cardholder to purchase goods or services; the cost of which is presented in the form of a monthly bill. This unsecured form of credit typically carries a higher interest rate that can be charged to the customer if the bill is not paid in full.

  • Credit Report:
    A report that provides information on where an individual works and lives, the timeliness and method of how they pay their bills, and how much money they owe to others.

  • Credit Score:
    A statistically derived number used to define a person’s creditworthiness. This number is used by banks or lenders to determine the chance that a person will repay a debt. The score is based on the information in a person’s credit report. The higher the number, the better a consumer’s chance to obtain a loan.

  • Criteria:
    A set list of standards or rules on which a conclusion or decision can be based.

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D

  • Debit Card:
    A plastic card that enables the cardholder to make purchases or withdraw cash where the amount of the purchase or withdrawal is immediately deducted from the individual’s bank account.

  • Decision:
    The act of making up one’s mind or reaching a conclusion.

  • Deposit:
    Money given to the bank to be secured in the account requested by the customer for access at another point in time.

  • Dime:
    A small silver-colored coin worth ten cents. A dime features the image of President Franklin D. Roosevelt.

  • Direct Deposit:
    An electronic transfer of money directly from an employer or government agency into a bank account that has been designated by the person receiving the money.

  • Dollar:
    The official currency of the Unites States of America. One dollar equals 100 cents.

  • Down Payment:
    The initial amount paid toward your investment in a house, typically between 10 and 20 percent of the total cost of the home. The larger your down payment the less your monthly payments will be.

  • Drive-by Download:
    A drive-by download is the infection of a computer with malware when a user visits a malicious website.

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E

  • Earning:
    Income received from employment, services performed by an individual or business or from the receipt of interest on your account or investment.

  • Emergency Fund:
    An easily accessible supply of money set aside for use only in unexpected or urgent situations of a serious nature. The purpose of such a fund is to improve financial security by creating a safety net to meet expenses in a time of crisis.

  • eStatement:
    An electronic version of a monthly banking statement typically delivered by visiting a secure bank web site.

F

  • FHA Mortgage:
    A mortgage option for individuals with poor credit history or new homebuyers that is insured, in whole or in part, by the Federal Housing Authority. The structure of an FHA mortgage  may help eliminate some of the costs associated with a typical mortgage.

  • Financial Plan:
    A documented forward-thinking approach used to achieve financial goals. A financial plan allows you to set and attain short-term objectives (those within one year) and long-term goals based upon known and presumed financial and life events.

  • Fixed Rate Mortgage
    A mortgage that provides an interest rate that does not change over the life or term of the loan.

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G

  • Goal Setting:
    The act of establishing and working toward a short-term or long-term objective.

H

  • Habits:
    Behavior patterns identified by frequency of repetition and actions that appear to be second-nature to the individual.

  • Home Equity:
    The value in your home determined by the difference between the value of your home and the amount you owe on your mortgage.

  • Home Equity Loan or Line of Credit:
    A way in which to borrow money against the equity in your home.

I

  • Identity Theft:
    When someone uses your personal information such as name, date of birth, address, social security number, bank account number, or other identifying information without your knowledge to commit fraud or theft.

  • Impulse Purchases:
    Spontaneous or unplanned expenditures. Gum, candy and magazines in the grocery checkout lines are often considered impulse purchases.

  • Income:
    The total amount of money you earn from employment and other sources.

  • Interest:
    An amount paid or charged for the use of money or for borrowing money.

  • Interest-bearing Checking Account:
    A checking account that earns interest on the available balance in the account. Minimum balance requirements are usually higher for this type of account, and there are often fees charged when the account balance drops below the required minimum balance. Due to the liquidity of a checking account, the interest rate earned is typically lower than CDs and savings accounts.

  • Investing:
    The act of committing money or capital in order to gain a positive financial return. This is often done through the purchasing of a stock, bond, or other asset.

  • Investments:
    The use, giving or devotion of money or assets in order to earn a profitable return in the form of interest, dividends or capital gains.

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J

K

 

L

  • Lifestyle:
    The way of life for an individual, group, or culture inclusive of purchasing habits. A lifestyle typically reflects an individual’s attitudes or values.

  • Liquidity:
    The ability for assets to be easily accessed and converted into cash.

  • Loan:
    Money you borrow and then pay back in portions over a set period of time. A rate of interest is applied to the amount borrowed and must be paid back over the same period of time.

M

  • Malware:
    Malware is a general term for malicious software including viruses, worms, Trojan horses and spyware. Many people use the terms malware and viruses interchangeably.

  • Mobile Banking:
    The ability to manage one’s bank account and make transactions via the World Wide Web on a mobile device, such as a cell phone or tablet.

  • Mobile Payment:
    Paying for an item or service through banking or other financial channel on a mobile device.

  • Money:
    Legal tender; the coin and currency declared by a government as the accepted currency of exchange.

  • Money Market Account:
    A savings account that offers interest in exchange for larger than normal deposits or balances. Market accounts may have requirements of minimum balances, limited transactions and limited check-writing over a set period of time. These accounts are also called money market deposit accounts.

  • Mortgage:
    An agreement or deed under which a person borrows money to buy property, especially a house, and the lender may take possession of the property if the borrower fails to repay the money

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N

  • Nickel:
    A silver-colored coin worth five cents. It is larger than the dime and smaller than a quarter. The nickel features the image of former President Thomas Jefferson.

O

  • Online Banking:
    The ability to manage one’s account and make transactions via the World Wide Web.

  • Opportunity Cost:
    When weighing an opportunity, it is what is given up in order to pursue another choice.

  • Overdraft:
    An overdraft occurs when you do not have funds available in your account to cover a transaction, and the bank allows the transaction to be paid anyway at the cost of a fee.

P

  • Paycheck:
    A check by which you are paid for your work or services provided.

  • Payday:
    The day on which you collect wages earned or a paycheck is distributed by your employer.

  • Penny:
    A copper-colored coin worth one cent. The penny features an image of former President Abraham Lincoln.

  • Personal Identification Number (PIN):
    A series of numbers, selected by a cardholder or randomly assigned by the card issuer, to provide an individual security in accessing an ATM, and helps prevent use of a bank card by an unauthorized person.

  • Phishing:
    Phishing refers to the process of tricking recipients into sharing sensitive information with an unknown third party.

  • Principal:
    The amount of money you are borrowing on a loan or the original amount of money invested, not including interest.

  • Purchase:
    Paying for an item or service.

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Q

  • Quarter:
    A silver-colored coin, larger than a nickel, that is worth 25 cents. The quarter features an image of former President George Washington.

R

  • Risk:
    The chance of losing your money or being hurt.

  • Rule of 72:
    A math formula that determines the number of years it will take to double your money at a given interest rate. Formula: 72 ÷ interest rate = number of years to double a specific amount of money.

S

  • Safe:
    (1). Free From danger, harm or risk. (2) A metal container usually having a lock, used for storing valuables.

  • Saving:
    Keeping something, such as money, for use at a later time.

  • Savings Account:
    An interest-bearing account used for setting aside and growing funds. Banks use the money deposited by a customer to fund loans. For this right, banks pay the customer interest for the use of their money.

  • Savings Goals:
    A set of monetary objectives toward which you are working. These can be short-term or long-term objectives. Developing a clearly defined goal, writing out a plan to reach it, and measuring progress along the way may help you achieve your target.

  • Secured Credit:
    Credit that is protected and backed by the value of your property.

  • Service Charge:
    The cost associated with the use of particular product or offering.

  • Simple Interest:
    (1). For deposits, interest calculated by applying the stated percentage rate of interest to the principal only, and not to previously earned interest. (2). For loans, interest calculated by applying an interest rate to the amount of principal outstanding each day.

  • Skimming:
    An electronic method of capturing someone’s personal information employed by identity thieves, an act involving a small device that scans a credit card or bank card and stores the information contained in the magnetic strip.

  • Social Engineering:
    Social engineering refers to the tricks cyber criminals use to fool victims into performing an action. Typically, these actions are opening a malicious webpage or running an unwanted file attachment.

  • Social Security Card:
    A blue paper card issued by the U.S. Social Security Administration containing your name and a unique, nine-digit number that stays with you throughout your life. Your Social Security Number is unique to you. It does not change, no matter how often you move, change occupations or change your name.

  • Spam:
    Spam is unsolicited commercial email, the electronic equivalent of the junk mail that comes to your mailbox.

  • Spending:
    Using your money to buy things you want or need.

  • Spyware:
    Spyware is software that enables advertisers or hackers to gather sensitive information without your permission.

  • Statement:
    A paper record that shows all account activity over a specified period of time provided by a financial institution. Historically, these statements were delivered via postal mail, but eStatements, delivered through the World Wide Web, are becoming much more popular due to their timely delivery and digital convenience.

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T

  • Theft:
    The act of stealing or dishonest taking of property belonging to another person.

  • Trojan Horses:
    Trojan horses are programs that pretend to be legitimate software, but actually carry out hidden, harmful functions.

U

  • Unsecured Credit:
    Credit that is not backed by collateral and is a higher risk for a lender, such as a credit card. Due to the increased risk for the lenders, this type of credit often carries a higher interest rate.

V

  • Value:
    The worth or importance of something.

  • Viruses:
    Viruses are computer programs that can spread by making copies of themselves.

W

  • Withdrawal:
    Money removed from an account by the account holder.

  • Worth:
    The value of a thing or person.

X

Y

Z

 

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