Schuppe - Financial literacy terms

PIN Number

A PIN is your personal identification number. You pick your own PIN number, and it's used to authenticate your identity for electronic transactions. It's an extra layer of security.

Budget

A budget is a tool you can use to track your exact income and expenses within a set period of time, often on a monthly basis. Managing a budget will allow you to ensure you're living within your means.

Checking Account

A checking account is an extremely liquid type of deposit account found at most financial institutions. It's liquid because you can easily access your money with deposits and withdrawals. Most checking accounts come with a debit card you can use to withdraw funds for purchases.

Direct Deposit

A direct deposit is an Automated Clearing House (ACH) transaction, where your payment is electronically transferred to your chosen bank account. This payment could be your paycheck, pension, social security payment, or even travel reimbursement. Almost all employers now offer the ability to enroll in direct deposit in lieu of taking a paper check.

ACH Transfers

ACH stands for Automatic Clearing House. It's an electronic network used by financial institutions to make financial transfers in the U.S. The network is used for direct deposits and direct payments from bank to bank. These types of transactions could include payroll, tax refunds, consumer bills, and more.

Overdraft

An overdraft is when you attempt a transaction that would exceed your account balance, but the financial institution extends you a temporary line of credit to allow the transaction to take place. You are then expected to not only bring your account balance back up to a positive number, but also pay a fee for the service.

Credit

Credit is the measure of trust one party has in another party's ability to receive some kind of resource now and pay for it at a designated point in the future. In most cases, that means a person in relation to her bank. Banks issue the vast majority of credit, acting as a third party when the person uses the credit as money to make a transaction.

Principal

In the context of a loan, the principal is the initial amount issued to the borrower - not including any interest owed during repayment. If you take out a loan for $10,000, the principal amount is $10,000. However, when you're paying back the loan, you'll see that your payments are going towards the principal amount and the interest.

Interest

Interest is the fee you pay for borrowing money. When you take out a loan, you'll not only owe the loan amount back to the issuer - but also an additional percentage of money. This additional percentage is the interest.

Debt

Something, typically money, that is owed or due.

Balance (bank account)

The amount of money that you have in your bank account

Balance (debt)

The balance of a debt is the amount of money that you still owe after you have paid some of it

Routing Number

This 9-digit number can be found on the bottom left portion of a check. It's the electronic address unique to the financial institution. It identifies the specific financial institution during an electronic transaction. Also known as an American Bankers Association (ABA) transit number.

Credit Score

This is a number assigned to each individual that determines their creditworthiness. Lenders use it to estimate how likely that person would be to pay back a requested loan. Scores range from 300-850, 850 being a perfect score. Higher scores will give you access to more lending opportunities at more attractive rates. We recommend shooting for a score above 720. This score is based upon your credit history and your credit report.

EMV or Chip Technology

This is a secure transaction procedure that utilizes encrypted chips to decrease fraud on cards. Your credit and/or debit card will come with a small chip that has to be inserted into a point-of-sale machine to complete the transaction. Each transaction is coded uniquely by the chip

Variable Interest Rate

This is an interest rate that changes periodically based on economic conditions. If you take out a loan with a variable interest rate, the total interest you pay could increase or decrease upon each evaluation period.

Fixed Interest Rate

This is an interest rate that never changes during the life of a loan. No matter how long the loan period is or the economic conditions, you will pay the same interest rate.

Savings Account (or Share Account)

This is the most basic type of account you can open at a financial institution. It's an interest-bearing deposit account, meaning it will earn a small amount of interest on the money deposited in the account. At credit unions, these accounts are often called share accounts because they represent your stake in ownership as a member.

Debit Card

This plastic card connects directly to your checking account. You can pay with a debit card and pull funds directly from your checking account to make the purchase. They are an alternative to paying with cash, physical checks, or credit cards.

Credit Card

This plastic card is issued by a financial institution. Credit cards allow you to make purchases up to a certain amount (your credit limit), and pay back that amount at a later date with interest. The interest will be calculated on any amount not paid back within a month of purchase.

Annual Percentage Rate (APR)

This rate shows the annual cost of interest over the principal amount of a loan. For example, if the APR on a personal loan is 8.99%, you can calculate that you would pay about 8.99% of the loan amount in interest. This number can help you compare the interest rates on loans and accounts between different financial institutions. This rate does not take into account compounding interest.

Credit Report

This report is a compilation of your entire credit history. Your credit score is determined based on the information in this report. You're entitled to view a FREE copy of your credit report once a year at each of the three major credit bureaus. We highly recommend checking your credit report routinely for mistakes or fraud that may be damaging your score. You can report incorrect information to the bureaus to be removed from your report

Annual Percentage Yield (APY)

While the APR shows how much interest you'll pay, the APY shows how much interest you'll earn. It uses a basic calculation to estimate the annual rate of return on your money, based on the funds being in the account for a full year. It does take into account compounding interest, but not any account fees that may be present.