Unit 4 Vocab – Banking, Credit, and Risk

Bank

A financial institution where people keep money, deposit checks, withdraw cash, and get loans.

Credit Union

A member-owned financial institution that provides services like savings accounts and loans.

Checking Account

An account used for everyday spending and payments.

Savings Account

An account designed to store money and usually earn interest.

Deposit

Money put into a bank account.

Withdrawal

Money taken out of a bank account.

Transfer

Moving money from one account to another.

Debit Card

A card that takes money directly from your bank account when you make a purchase.

Credit

Money borrowed that must be repaid, usually with interest.

Credit Report

A record of your borrowing and repayment history.

Credit Bureau

A company that collects and maintains information about consumers’ credit history.

Credit Score/FICO

A number that represents how likely you are to repay borrowed money.

Debt-to-Income Ratio (DTI)

The percentage of your income that goes toward paying debt.

Credit Card

A card that lets you borrow money to make purchases and repay it later.

Revolving Credit

Credit that can be borrowed, repaid, and borrowed again up to a limit.

Annual Percentage Rate (APR)

The yearly cost of borrowing money, expressed as a percentage.

Interest

Money charged for borrowing money or earned for keeping money in an account.

Fees

Extra charges for certain financial services or actions.

Creditworthiness

How trustworthy you appear to lenders based on your ability and history of repaying debt.

Cash Flow

The money coming into and going out of your finances.

Minimum Payment

The smallest amount you must pay toward a credit card balance each month.

Installment Loan

A loan repaid through regular payments over a set period of time.

Repayment

Paying back money that you borrowed.

Collateral

Property that a lender can take if a borrower fails to repay a secured loan.

Debt

Money that you owe to another person or organization.

Payday Loan

A short-term, high-cost loan typically based on your upcoming paycheck.

Auto Loan

A loan used to purchase a vehicle.

Lease

An agreement that allows you to use something for a specific period in exchange for payments.

Mortgage

A loan used to buy a house or other real estate.

Fixed-Rate Mortgage

A mortgage with an interest rate that stays the same throughout the loan.

Variable-Rate Mortgage

A mortgage whose interest rate can change over time.

Down Payment

The amount of money paid upfront when purchasing something, especially a house or car.

Private Mortgage Insurance (PMI)

Insurance that protects the lender when a borrower has a smaller down payment on a conventional mortgage.

Asset

Something you own that has financial value.

Liability

Money or financial obligations that you owe.

Net Worth

The value of what you own minus what you owe.

Insurance

Protection against financial loss from unexpected events.

Premium

The amount you pay for insurance coverage.

Deductible

The amount you must pay yourself before insurance begins paying covered expenses.