Unit 3 Economics and Personal Finance

Annual Fee

A yearly fee that may be charged for having a specific credit card, independent of how you use the card.

ATM

Allows a person to manage a bank account holder’s funds through actions such as withdrawing or depositing money, viewing account balances, etc.

APR

The cost you pay each year to borrow money, including fees, expressed as a percentage.

Bank Statement

A monthly document prepared by your financial institution which shows all the transactions related to your account.

Bankruptcy

A legal proceeding carried out to allow individuals or businesses freedom from their debts, while simultaneously providing creditors an opportunity for repayment.

Certificate of Deposit (CD)

A bank product that earns interest on a lump-sum deposit that’s untouched for a predetermined period of time.

Check

A written, dated, and signed order to the bank that tells it to pay a definite sum of money to a payee.

Checking Account

A bank account that allows you to easily access your funds for daily use through checks or debit cards.

Collateral

Something valuable that the lender can take as payment if you can’t or don’t repay your secured loan.

Compound Interest

Reinvesting earned interest back into the principal, so that interest is calculated on both the initial amount and the accumulated interest.

Credit Bureau

A consumer-reporting company that collects and sells information about how individual people manage their credit.

Credit Card

A card that allows the holder to make purchases without cash by borrowing money.

Credit History

A record of a person’s use of credit over time; 15% of your credit score is based on the length of your credit history.

Credit Limit

The maximum amount that may be borrowed on a credit card.

Credit Score

A 3-digit number (ranging from 300-850) based on an individual’s credit history detailed in a credit report.

Debit Card

A card that is directly connected to your checking account; it enables you to conduct ATM transactions and to make purchases instead of using cash or writing a check.

Debt Avalanche Method

A method of debt repayment whereby the borrower prioritizes paying off debts with the highest interest rates first.

Debt Snowball Method

A method of debt repayment whereby the borrower prioritizes paying off debts with the smallest balances first.

Direct Deposit

An automatic electronic deposit of net pay to an employee’s designated bank account.

Emergency Fund

Money set aside for unanticipated expenses or loss of income.

FDIC Insurance

Protection provided by the FDIC; protects the deposit of customers against loss up to $250,000 per account.

Hard Inquiry

An inquiry into your credit history, typically in advance of applying for a loan. Hard inquiries can negatively affect your credit for 12 months and remain on your credit history for two years.

Maintenance Fee

A monthly fee that some banks charge to provide access to checking or savings accounts.

Minimum Balance

A certain amount of money that must be kept in an account as required by that particular financial institution.

Minimum Payment

The smallest amount of credit card bill that a credit card holder must pay during a billing cycle to remain in good standing with the lender.

Money Market Account

A type of savings account that may allow debit card and check writing privileges.

Savings Account

A type of deposit account provided by banks and financial institutions; allows interest to be earned on the deposited amount.

Overdraft Protection

A loan banks offer to their customers when they try to withdraw more funds than they have in their account, usually for a fee and with interest.

Payday Loan

A small loan, offered through a business, lent at a high interest rate, and meant to be paid as soon as you receive your next paycheck.

Soft Inquiry

An inquiry into your credit history as part of a background check. This doesn’t affect your credit score.

Schumer Box

A standard table that legally must appear in a credit card agreement showing basic information about the card’s rates and fees.

Simple Interest

Interest paid on the principal alone.

Thin File

A term used to describe someone with little to no credit history.

Unusual Activity Alert

A notification that lets you know when there is suspicious activity with your account.