WSS Unit 3 & 4 Key Terms Review: Credit & Debt, College & Career, Income & Taxes

APR

Annual percentage rate; the annual rate of interest that is charged for using credit

Balance Transfer

Paying off one credit card balance by transferring it to another credit card. (Paying off one credit card by using another)

Transaction Fees

A charge for making a transaction. Transaction fees may be a percentage of the total amount or a flat rate regardless of size.

Late Fee

A penalty for making a payment after the due date.

Grace Period

A time period after your bill is due in which you are not charged any fees for your late payment.

Principal

The original amount of money borrowed in a loan agreement.

Interest

The price you pay for the use of borrowed money, usually a percentage of the borrowed amount.

Schumer Box

Terms and fees of a credit card in an easy to read box required by law on all credit card applications and solicitations.

Fixed Interest Rate

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

Variable Interest Rate

An interest rate on a loan or security that fluctuates over time, because it is based on an underlying benchmark interest rate or index that changes periodically.

Secured Credit Card

A type of credit card that is backed by a savings account used as collateral on the credit available with the card. This type of card is great for young people trying to establish credit, or for people with a poor credit rating.

Annual Fee

A yearly fee that's charged by the credit card company for the convenience of the credit card

Cash Advance

Borrowing cash using your credit card. Interest begins accruing immediately and you may be charged a fee based on the terms and conditions of your card. In general, not a good way to borrow cash!

Introductory APR

The, typically low, rate charged during the introductory period after a credit account is opened, after which the regular, typically higher, APR will apply

Credit Limit

The maximum amount of credit a lender will extend to a customer.

Award Letter

The notification of financial aid award. The letter lists the types and amounts of financial aid the student is eligible for. To finalize the award package, the student must sign and return the award letter to the Financial Aid office.

Cost of Attendance

The total amount it will cost you to go to school (includes tuition and fees, room and board, as well as personal expenses).

Subsidized Student Loan (Federal)

A need-based loan from the federal government, the interest of which is paid for by the U.S. Department of Education while the borrower is in school and during grace and deferment periods.

Unsubsidized Student Loan (Federal)

This is a type of federal student loan on which the government does not pay the interest that accrues while a student is in school.

Private Student Loans

These are financed by private companies rather than the government. Since interest rates and

fees for these loans aren't capped by the government, they cost more than federal loans.

Grants

Financial Aid funds from colleges or the federal government, usually need-based aid, and do not need to be paid back.

Scholarships

Financial aid that is awarded for merit or talent. These funds do not have to be paid back.

Room and Board

The cost of housing and food while attending college or career school.

Tuition

A sum of money charged for teaching or instruction by a school, college, or university.

Delinquency

Broadly refers to a borrower not being current on his or her payments

Deferment

A period of time were you can apply to NOT PAY on your student loans. Sometimes you are able to not pay the interest during this period of time (interest doesn't accrue)

Default (on a loan)

failure to pay back a loan/stop making payments on a loan.

Car Title Loan

a high-interest, short term loan of cash for which an automobile title is required as collateral. If you fail to pay back the loan, you may lose your car.

Pay Day Loans

An organization that lets you borrow against next paycheck. There are substantial fees for this service. If this loan is not paid back in short period (2 weeks), it renews with additional fees and interest. Some can result in consumers paying higher than 100% interest annually.

Credit Card

A type of revolving credit account issued by a bank that allows users to finance a purchase and pay back that purchase over time, including interest added after a grace period of 20-25 days.

Work Study

A program that allows students to work part time while continuing their studies.

FAFSA

Free Application for Federal Student Aid

Opportunity Cost

Cost of the next best alternative use of money, time, or resources when one choice is made rather than another.

Financial Aid

Financial assistance for college or post-secondary training: scholarships, grants, waiver of fees, loans.

Parent Plus Loan

Federal college loan borrowed and repaid by a parent on behalf of a dependent student.

Identity Theft

the fraudulent acquisition and use of a person's private identifying information, usually for financial gain.

Scam

an attempt to trick someone, usually with the intention of stealing money or private information

Revolving Credit

credit that is automatically renewed as debts are paid off. Can be used over an over again up to a set limit.

Installment Credit

credit used to finance a single high-priced item through a series of equal payments made over a set period of time,

Loan Term

The length of time you have to pay off a loan.

Phishing

A technique to gain personal information for the purpose of identity theft, usually by means of fraudulent e-mail

Retargeting Ads

Marketing tactic that involves showing the same advertisement to individuals across multiple websites.

"Power over Purchase"

A strategy to avoid unchecked impulse buying in three steps: wait overnight to see if you really need/want to purchase, consider the opportunity cost, and seek advice from someone you trust on whether this is a smart purchase.

Consumerism

The idea that increasing the consumption of goods and services purchases is always a desirable goal and that a person's well being and happiness depend upon material possessions.

Credit Score

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

FICO

An acronym for the Fair Isaac Corporation, the company that developed the FICO score, which is the most commonly used credit score in the United States.

FICO Score Range

300-850

3 Major Credit Bureaus

Equifax, Experian, Transunion

Credit Report

a report on a person's creditworthiness that includes identifying information, Summary of Credit Accounts, Public Records (Bankruptcies & Collection Records), & Credit Inquiries.

Debt Snowball

Method of paying off debts progressively, starting with the debt with the SMALLEST REMAINING BALANCE first.

Debt Avalanche

Method of paying off debts progressively, starting with the debt with the HIGHEST INTEREST RATE first

Upside-Down Loan (Underwater)

A negative equity auto or home loan situation when what you owe on the loan is higher than the current value of the auto/home. When you OWE more than it's WORTH.

Higher Down Payment & Shorter Term

Two ways to lower the total cost of an auto you purchase with a loan.

CARD Act of 2009

Federal reform of credit card regulations that include protections for consumers under 21 to help prevent young people from accumulating debilitating debt.

Minimum Payment

The smallest required payment that a credit cardholder can pay on a monthly bill and still remain in good standing with the lender. Sometimes it doesn't even cover the interest charged in that month, so catches many consumers in cycles of debt. Don't Do It!

Depreciating Asset

Something that you own that decreases in value overtime.

Appreciating Asset

Something you own that increases in value overtime.

Cosigner

Someone who promises to pay a loan if the borrower fails to pay.

Collateral

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

Paycheck Withholding (Required)

Money that your employer takes out of your check to pay for taxes, such Social Security, Medicare, State and Federal Taxes.

Paycheck Deductions (Voluntary)

Money withheld from a paycheck for employer provided programs such as 401K Retirement Plans, Health Savings Accounts, Health Insurance Premiums.

FICA Taxes

Based on the Federal Insurance Contributions Act; tax withheld from employees' paychecks and matched by employers for Social Security and Medicare.

Tax Bracket

A range of income on which a given marginal tax rate is applied.

W-4 Form

An employment form required by law that you complete so that your employer can determine the proper amount to withhold from your paycheck for taxes.

I-9 Form

Employment eligibility verification form, used for verifying the identity and employment authorization of individuals hired for employment in the United States.

W-2 Tax Form

A form that an employer must send to an employee and the Internal Revenue Service (IRS) at the end of the year that reports your earnings and your taxes withheld in that year.

1040 Form

The standard Internal Revenue Service (IRS) form that individuals use to file their annual income tax returns.