College Personal Finance Study Guide Unit 4 - Financial Services and Credit

Restrictive endorsement

Restrictive endorsement

For deposit only, your signature on the back of a check.

Electronic Funds Transfer (EFT)

Direct deposits, bill pay, person to person payment systems.

Debit card

No interest, directly linked to your bank account.

Certified check

A check that the bank verifies you have money for.

Checking account

Used for payments and proof of payments.

Blank endorsement

Your signature on the back of a check.

Credit card

Borrowed money to buy something now, pay later.

Title loan companies

Companies that offer cash advances using auto titles as security.

Identity theft protection

Research, secure passwords, shred documents, be cautious.

Credit

Money borrowed to buy something now, pay later.

Bankruptcy

Extreme debt, assets used to repay outstanding debt.

Principal

Cost of item bought on credit or amount borrowed.

Interest

What the lender charges for using credit.

Amortization chart

Monthly payments for a loan with interest.

Maturity date

Last payment date for installment loans.

Grace period

Time before interest is charged.

Prime rate

Rate that commercial banks charge large corporations for loans.

Discount rate

Rate the Fed charges banks for loans.

Garnishment

Taking money out of your paycheck to repay debt.

Repossess

Taking back an item used as collateral for a loan.

5 C's of credit

Capital (amount of money an applicant has) , Capacity (borrowers ability to pay back loan), Character (composition of borrowers financial history and health) , Collateral(asset used to secure a loan), Conditions (how a borrower intends to use the money)

FICO scores

Credit scores determined by payment history, amounts owed, length of credit history, new credit, types of credit.

Credit bureaus

Companies that gather, store, and sell credit information.

Universal default

Raising rates on a credit card due to late payments on other loans.

Secured loans

Loans with collateral and lower interest rates.

Home equity loan

Loan using the paid balance of your house as collateral.

Advantages of credit cards

Convenience, fraud protection, rewards programs.

Disadvantages of credit cards

Overspending, high interest rates.

Most important when choosing a credit card

Low interest rates.

Banks

For-profit companies owned by stockholders.

Credit unions

Non-profit institutions owned and controlled by customers.

Identity theft

When someone steals your personal information.

Savings account

Money put away for later use.

Reconciling bank account

Subtract outstanding payments, fees, add interest.

Phishing

Fraudulent practice of sending emails to obtain personal information.

Payday loan companies

Companies that offer short-term loans with high interest rates.

Pawn shops

Shops that offer loans based on tangible items as collateral.