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 earned by investing, expressed as a percentage that represents the actual yearly cost of funds over the term of a loan, including any additional costs.

Balance Transfer

A transaction in which you move debt from a high-interest credit card to one with a lower interest rate, ideally with a 0% introductory APR.

Car Title Loan

A type of short-term personal loan where 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

Borrowing cash against your credit card's available credit, turning your credit line into a short-term cash loan.

Collateral

Something pledged as security for repayment of a loan, forfeited in case of default.

Consumerism

The idea that increasing the consumption of goods and services is a desirable goal, affecting well-being and happiness.

Cosigning

Signing for another person's debt, creating a legal obligation to make payment if the borrower defaults.

Credit

A contractual agreement where a borrower receives value now and agrees to repay the lender later, generally with interest.

Credit Bureau

A company that collects information about credit history and sells it to lenders.

Credit Card

A type of revolving debt account issued by a bank allowing users to finance purchases and pay back over time.

Credit Limit

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

Credit Report

A record of your credit history including identity, existing credit, public records, and inquiries.

Credit Score

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

Creditworthiness

Trustworthiness based on prior history; a general qualification for borrowing.

Debt

An obligation of repayment owed by one party to another, including repayment of the original amount plus interest.

Debt Avalanche

A debt repayment strategy focusing on paying off debts starting with the highest interest rate.

Debt Snowball

A preferred method of repayment organizing debts from smallest to largest and focusing payments on the smallest.

Default (on a loan)

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

Default Rates

Higher interest rates charged when payments on a revolving line of credit are overdue.

Delayed Gratification

The ability to wait for a more rewarding or pleasurable outcome later instead of opting for immediate satisfaction.

Delinquency

Being late on a payment by 30 days or more in the context of credit.

Depreciation

A decrease or loss in value.

Depreciating Asset

An item that loses value over time.

FICO Score

A credit rating from Fair Isaac & Company used to measure a person's creditworthiness, ranging from 300-850.

Fixed Interest Rate

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

Grace Period

A time frame after a payment's due date during which no late fee is charged.

Identity Theft

The crime of obtaining another person's personal information to assume their identity.

Installment Loan

A loan repaid over time with scheduled payments.

Interest

The cost of borrowing money, usually a percentage of the amount borrowed.

Interest Rate

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

Introductory Rate (APR)

An initial interest rate offered at the loan or credit card's start, often increasing after a period.

Late Fee

A charge for making a minimum payment on a credit card after the due date.

Loan

A debt documented by a note detailing principal, interest, and repayment terms.

Loan Term

The time frame during which a loan agreement is active.

Minimum Payment

The smallest required payment to maintain good standing on a credit card.

Phishing and Smishing

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

Ponzi Scheme

A fraudulent investing scam that pays returns to earlier investors with new investors' funds.

Predatory Lending

Unfair lending practices imposing abusive terms on borrowers.

Principal

The initial amount of money borrowed or invested.

Retargeting Ads

Showing the same ad to users across different websites based on their online behavior.

Revolving Credit

An account allowing repeated charges up to a maximum limit, such as credit cards.

Schumer Box

A legal standard table in a credit card agreement displaying rates and fees.

Secured Credit (Card)

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

Transaction Fee

An extra charge for credit activities like ATM use or cash advances.

Unsecured Credit Card

Common credit cards not directly tied to property for security.

Upside-Down Loan (Underwater)

Owing more on a loan than the collateral is worth.

Variable Interest Rate

An interest rate that fluctuates based on underlying benchmark rates.