Unit 4 Key Terms | Borrowing & Safeguarding Money

Annual Fee

A yearly fee charged by the credit card company for the convenience of having/using a credit card.

Annual Percentage Rate (APR)

The annual rate charged for borrowing or made by investing, expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan.

Balance Transfer

A transaction in which you move debt from a high-interest credit card to a card with a lower interest rate.

Car Title Loan

A type of short-term personal loan in which the borrower pledges their car as collateral.

CARD Act of 2009

Provides consumer protections for credit card holders, especially young adults under 21.

Cash Advance

A way to borrow cash against your credit card's available credit, effectively turning your credit line into a short-term cash loan.

Collateral

Something pledged as security for repayment of a loan, to be forfeited in the event of a default.

Consumerism

The idea that increasing the consumption of goods and services is always a desirable goal and that a person's well-being depends on obtaining consumer goods.

Cosigning

The act of signing for another person's debt, involving a legal obligation to make payment if the borrower defaults.

Credit

A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at a later date, generally with interest.

Credit Bureau

Company that collects information about your credit history and sells it to lenders.

Credit Card

A type of revolving debt account that allows users to finance a purchase and pay back the borrowed amount over time.

Credit Limit

The maximum amount of money a lender allows you to borrow on a credit card or line of credit.

Credit Report

A record of your credit history that includes information about your identity, existing credit, public record, and inquiries.

Credit Score

A measure of an individual's credit risk, calculated from a credit report using a standardized formula.

Creditworthiness

Trustworthiness with money based on prior history, including character, capacity, capital, collateral, and conditions.

Debt

An obligation of repayment owed by one party to a second party, typically including the original loan amount plus interest.

Debt Avalanche

A strategy for paying off debt starting with the highest interest rate first.

Debt Snowball

A preferred method of debt repayment that attacks the smallest debts first while making minimum payments on others.

Default (on a loan)

Failing to repay a loan according to the agreed-upon terms of the loan contract.

Default Rates

The higher interest rate charged to a borrower when payments on a revolving line of credit are overdue.

Delayed Gratification

The ability to put off something mildly fun now to wait for a more rewarding experience later.

Delinquency

Being late on a payment by 30 days or more.

Depreciation

A decrease or loss in value.

Depreciating Asset

An item you own that loses value over time.

FICO Score

A credit rating developed by Fair Isaac & Company, ranging from 300-850, that measures creditworthiness.

Fixed Interest Rate

An interest rate that does not change from month to month.

Grace Period

A period after the due date during which no late fees will be charged.

Identity Theft

The crime of obtaining personal or financial information to assume someone's identity for transactions.

Installment Loan

A loan that is repaid over time with scheduled payments.

Interest

The cost of money that is borrowed or loaned, usually a percentage of the borrowed amount.

Interest Rate

The percentage paid to a lender for the use of borrowed money.

Introductory Rate (APR)

An interest rate charged in the early stages of a loan or credit card that often increases after a specified period.

Late Fee

A charge for making a minimum payment after the due date, typically $25-$35.

Loan

A debt evidenced by a note, specifying the principal amount borrowed, interest rate, and repayment date.

Loan Term

The time frame during which a loan agreement is in force.

Minimum Payment

The smallest required payment that a credit card holder can pay to remain in good standing.

Phishing and Smishing

High-tech scams that deceive consumers into disclosing personal information.

Ponzi Scheme

A fraudulent investment scam promising high returns to earlier investors using funds from new investors.

Predatory Lending

Lending practices that impose unfair or abusive terms on a borrower.

Principal

The initial amount of money borrowed or invested.

Retargeting Ads

Showing the same ad to individuals across multiple websites based on their online behaviors.

Revolving Credit

An account on which the account holder can charge repeatedly up to a maximum limit.

Schumer Box

A standard table that must appear in a credit card agreement showing basic information on rates and fees.

Secured Credit (Card)

A type of credit card backed by a savings account used as collateral.

Transaction Fee

An extra charge for activities such as using an ATM or receiving a cash advance.

Unsecured Credit Card

The most common type of credit card not directly connected to property.

Upside-Down Loan (Underwater)

Owing more on a loan than the asset it is secured against is worth.

Variable Interest Rate

An interest rate on a loan that fluctuates over time.