FBLA Personal Finance Part 2 (copy)

Credit

Money that a lender makes available to a borrower with the understanding that the borrower will repay the money in the future

Interest

Fees charged by a lender on borrowed money

Non-installment Credit

Credit that is extended for a short term, such as 30 days or less

Installment Credit

Used for specific purchases but allows the borrower more time to repay the money

Principal

The total amount of money outstanding on a loan

Revolving Open-End Credit

Allows consumers to borrow up to some preset maximum amount. An example would be a credit card.

Creditors

Those who provide credit

The Credit Card Accountability, Responsibility, and Disclosure Act

ensures that consumers who pursue credit card services are treated fairly and have access to complete information about the fees and other provisions of the credit agreement

The Equal Credit Opportunity Act

Prohibits discrimination in the granting of credit on the basis of such factors as race, skin color, and sex

The Fair Credit Billing Act

Sets up procedures requiring creditors to promptly credit your payments and correct billing mistakes and allows you to withhold payments on defective goods

The Fair Credit Reporting Act

Sets up a procedure for correcting mistakes on your credit record.

FTC

Is an independent federal agency whose main goals are to protect consumers and to ensure a strong competitive market by enforcing a variety of consumer protection and antitrust laws.

The Financial Reform Act

Designed to prevent deceptive practices in the credit granting process.

The Truth In Lending Act

Gives you three days to change your mind about certain credit transactions that use your home as collateral. It also limits your risk on lost or stolen credit cards

Credit Bureaus

Organizations that collect credit information about individual consumers

Credit Report

Summarizes an individual's existing and past credit history, including applications for credit of any kind, payment record for bills, whether you have paid late fees, and any other public information

Credit Score

A numeric score that uses your credit history to asses your creditworthiness

Identity Theft

When someone uses your personal information without your permission for personal gain

Shoulder Surfing

When someone in a public place steals your personal information by overhearing your conversation or viewing personal info

Skimming

Copying your credit card numbers straight from the cards

Pretexting

When someone improperly accesses your personal information by posing as someone who needs data

Phishing

When pretexting occurs online

Pharming

When someone uses e-mail viruses to redirect you from a legitimate website to a fake one made to obtain your information

Personal Loans

Type of credit that is typically started at the time of purchase for a specific asset.

Down Payment

A required portion of the purchase price paid at the time of purchase

Cosigner

Someone who agrees to sign the loan document and to repay the loan if the other individual stops making payments

Maturity Date

The date at which the loan will be completely repaid

Annual Percentage Rate

The rate that factors in all the financing costs so that borrowers know exactly what they are paying and can make informed decisions

Secured Loan

A loan that has some asset pledged against the lain so that the lender is assured of winding up with some valuable asset if the borrower fails to pay off the loan

Collateral

Assets that have been pledged against loan repayment

Unsecured Loans

Loans that have no collateral pledged against the loan

Default

Stop making loan payments

Mortgage

Type of loan taken out to obtain a home

Fixed Mortgage Rate

Interest rate stays the same for the life of the loan

Adjustable Mortgage Rate

Mortgage where the rate may go up or down over time

Teaser Rate

An extremely low interest rate for a short period of time

Subprime Mortgage

Higher interest rate mortgage loans made to people with poor credit scores

Home Equity Loan

Allows a homeowner to borrow against the equity in his or her home. Equity is the difference between the home's value and the amount owed to a lender

Line of Credit

An agreement to allow borrowing as needed up to a certain amount of money

Policy Riders

Additional insurance coverage to cover things such as jewelry or valuable heirlooms that are often not fully covered by a typical insurance policy

Federal Stafford Loans

The most common type of federal education loan

Federal Perkins Loans

Same as Federal Stafford Loans, but are for students with an exceptional financial need

Lease

Long-term rental agreement

Liability Coverage

Auto insurance that covers you for any damage you do against other people or their property

Credit Card

Provide individuals with revolving open-end credit, which can be drawn from repeatedly up to some preset limit

Credit Check

Creditors will access your credit report in order to examine your credit history and determine your ability to repay

Overdraft Protection

Credit card feature that allows one to exceed their credit limit

Annual Fee

Fee for the privilege of using a card

Grace Period

A time allowed by credit card companies in which you are not charged interest on purchases

Cash Advances

You can use your card to get cash rather than just purchasing a good or service

Debt Consolidation

Combining several small accounts into one larger account that you may be able to finance at a lower rate at a bank or with another lender

Payday Lending

A lender who provides cash advances at a high cost to customers in exchange for one of their checks dated for some time in the future

Pawnbroker

Receives and holds items in exchange for loans that run for 30 days to as much as 3 months

Depository Institutions

Financial institutions that provide traditional checking and savings accounts for individuals and businesses

Non-depository Institutions

Institutions that provide certain financial services but do not accept traditional deposits

ATM

Automatic teller machine.

Checking Account

An account into which you deposit money and from which you gradually withdraw money by writing checks or using a debit card

Check

A written order from you to your bank instructing it to pay money from your account to another party

Negotiable Order of Withdrawal Account

Function much like checking accounts except they pay a small amount of interest on money in the account

Debit Card

Enables you to withdraw cash from your account at ATM's, or pay directly for goods or services at many stores and restaurants

Cashier Check

A type of check that is written to a specific payee but charged against the bank instead of your account

Money Orders

Similar to cashier checks but are purchased for cash so that the recipient can trust they are worth what they say

Traveler's Check

Checks written by large financial institutions with no payee specified

Bank Drafts

Occur when you ask someone to take money out of your bank account automatically to satisfy some financial need

Electronic Funds Transfer

When you authorize someone to access your bank account for payment or for deposit

FDIC

Federal Deposit Insurance Corporation. A U.S. government agency that provides insurance on bank deposits

NCUSIF

National Credit Union Share Insurance Fund. U.S. government-backed agency that provides insurance on credit union deposits

Credit Union

Functions similarly to a bank but has nonprofit status and is owned by its members

Federal Reserve System

Serves as the central bank of the United States

Price level Stability

Main goal of the Fed policy

Monetary policy

Primary tool to fight inflation and promote a healthy economy; involves raising or lowering of the money supply to achieve some goal

Fiat Money

Money currently used in the United States; has value because the government orders that it be accepted as payment

Demand Deposit

Money put into a checking account that can be withdrawn at any time

Certificate of Deposit

CD. A contract between an individual and the financial institution that specifies the length of time that the individual will leave a certain amount of money deposited in the account and the interest rate earned

Money Market Deposit Account

MMDA. Accounts that require you to maintain a minimum balance, have no maturity date, pay interest, and offer limited check-writing privileges

Compound Interest

The way that interest added to an account earns interest

Annual Percentage Yield

APY. The interest rate that takes the compounding frequency into account. It tells you what your account will really earn

Individual Retirement Accounts

IRA. A type of savings account created by the government to encourage people to save for retirement

Traditional IRA

Many people can make tax deductible contributions and all earnings are tax deferred.

Tax Deferred

The account's earnings are not taxed until they are withdrawn after retirement.

Roth IRA

Contributions that are not tax deductible but are never taxed

Defined Benefit Plans

Plan that guarantees you a specific amount of income when you retire

Pension Plans

A defined benefit plan under which an employer makes contributions to the plan on the employees behalf

Vesting

The process of earning eligibility for an employer benefit

Defined-Contribution Plan

The employer contributes to the employee's retirement account but does not guarantee a specific benefit

401(k)/403(b) Plans

Allow employees to make contributions into a retirement account which may feature a range of investment options

Annuities

A type of financial product that guarantees annual payments to the owner for a fixed period of time for a person's lifetime

Initial Public Offering

IPO. The first sale of a stock

Primary Market

Initial sale when the company receives money

Secondary Market

After IPOs

New York Exchange

NYSE. Form of Secondary market

Publicly Traded

When a company begins trading on one of the organized stock exchanges

Institutional Investors

Investors who trade large volumes of stocks on behalf of large institutions

Shareholders

People who own stock in a company

Dividends

Cash distributed to company shareholders

Securities and Exchange Commission

Government agency that regulates and monitors the stock market

Security

Investments issued by corporations in which the investor receives proof of ownership

Brokerage

A firm that provides investors access to the stock markets

Commission

A fee for carrying out a transaction

Discount Brokerage

Offers reduced level of service for cheaper. Ability to make trades online