Financial Terms

A2A (Account to Account): An electronic transfer that occurs from one account to another account usually at a different financial institution.

Annual percentage rate (APR): Annual interest rate expressed as a percentage of the loan balance.

Asset: Anything of value that a person or organization owns. This could include cash, property, inventory, car, house, or farm equipment.

ATM card: A plastic card that allows you to get money, deposit funds, or transfer funds from an automated teller machine. It’s different than a debit card in that it only works at the ATM.

Bankruptcy: The result of a court decision to excuse some or all debts of a person. Bankrupt people usually have a hard time getting credit later, and may lose property as a result.

Beneficiary: Someone who benefits by receiving money from an insurance policy, will, or an account left to them.

Budget: A tool individuals use to plan earnings and expenses for a period of time. A personal budget lists income and expenses such as food, housing, clothes, utilities, and entertainment.

Certificate of deposit (CD): A debt instrument from a financial institution, usually starting at $500 or $1000. You are lending the financial institution that amount for a specific time for which you earn a specific amount of interest. If you want your money back early, you will usually have to pay a penalty.

Collateral: What you give up if you don’t repay a loan. The collateral on a car loan is usually the car itself. If you don’t make the payments on time, the lender can take the car and sell it to pay off the loan.

Compounding: Earning interest on principal saved and on previously earned interest.

Co-sign:  To accept joint responsibility for repaying someone else’s loan. If the borrower does not make the loan payments, the co-signer is liable for the debt and must pay.

Credit card:  A plastic card that allows you to borrow money or buy products and services on credit with your signature. The lender that issues the card puts a dollar limit on its use, depending on your creditworthiness.

Credit history:  A record of loan repayment. Financial institutions send information on the loans they make to the three credit reporting companies to keep as a reference for future lending. As a consumer, you have the right to review your record and correct inaccuracies.

Debit card:  A plastic card that you can use like a credit  card. The difference is that a credit card lets you borrow money for a purchase, while a debit card makes payment immediately and electronically from your checking account.

Debt consolidation loan:  A loan used to repay several other loans. Debt consolidation usually reduces the borrower’s monthly payments by lowering the interest rate or extending the repayment period or both.

Default:  Failure to follow the terms of a loan agreement, such as not making timely payments.

Fair Credit Reporting Act (FRCA):  The federal law that promotes accuracy and ensures the privacy of the information in consumer reports.

Gift Cards: A VISA or MasterCard bought for a certain amount to give as a present to someone you know. They are common gifts at weddings, birthdays, or graduation parties.

Grace period:  Time during which a lender doesn’t charge interest on credit card purchases.

Gross income:  The amount a person has earned before payroll deductions are subtracted.

Individual retirement account:  A special federal program that allows you to delay the payment of taxes on some money you save, which reduces the amount of tax owed.

Interest:  An amount paid for the use of someone else’s money. The credit union pays you to use the money you save there.

Liability:  Something owed to another party such as a loan or debt.

Member:  Someone who belongs to a credit union.

Money market account:  A special type of savings account with limited withdrawals and higher interest rate than a regular savings account.

Money order:  A legal document that is a promise to pay the person named on it a specific amount of cash when presented at a financial institution. Money orders are an alternative to paying by cash or check.

Mortgage:  A loan to buy real estate and secured by real estate.

Net income:  Your total earnings minus your required or elective payroll deductions.

Overdraw:  To write a check for more money than you have in your account. A penalty is charged for being overdrawn.

Overdraft protection:  A line of credit established to protect an account holder from being overdrawn.

Prepaid card:  These plastic cards function much like a traveler’s check; the user pays money up front, gets a plastic card authorizing a certain amount of money, and then spends it over time.

Principal:  The amount borrowed that remains unpaid-not including future interest.

Share:  A given amount of money you deposit with a credit union to become a member.

Share draft:  A credit union term for a check.

Stop payment:  To tell your credit union not to honor a specific check that you have written, usually because you are unhappy with a service or product that you paid for.

Travel Cards: A re-loadable VISA or MasterCard used when traveling instead of travelers checks.

W-2 form:  A tax form that you get from your employer that reports your wages earned for the year along with federal and state taxes withheld.

W-4 form:  A tax form you get from your employer and fill out to help them determine how much taxes to withhold from your account.