Personal Finance Chapter 4 & 5 Vocabulary

simple interest

Interest computed on principal only and without compounding.

closed-end credit

One-time loans that the borrower pays back in a specified period of time and in payments of equal amounts.

Fair Credit Billing Act (FCBA)

Sets procedures for promptly correcting billing mistakes, refusing to make credit card payments on defective goods, and promptly crediting payments.

mobile commerce

The ability to purchase using a mobile device.

capital

The borrower's assets or net worth.

character

The borrower's attitude toward his or her credit obligations.

capacity

The borrower's financial ability to meet credit obligations.

line of credit

The dollar amount, which may or may not be borrowed, that a lender makes available to a borrower.

conditions

The general economic conditions that can affect a borrower's ability to repay a loan.

annual percentage rate (APR)

The percentage cost (or relative cost) of credit on a yearly basis. The APR yields a true rate of interest for comparisons with other sources of credit.

rate of return

The percentage of increase in the value of savings as a result of interest earned; also called yield.

finance charge

The total dollar amount paid to use credit.

consumer credit

The use of credit for personal needs (except a home mortgage).

annual percentage yield (APY)

Truth in Savings (TIS) defines annual percentage yield (APY) as the percentage rate expressing the total amount of interest that would be received on a $100 deposit based on the annual rate and frequency of compounding for a 365-day period. APY reflects the amount of interest a saver should expect to earn.

compounding

refers to interest that is earned on previously earned interest.

automatic teller machine (ATM)

A computer terminal used to conduct banking transactions; also called a cash machine.

mutual savings bank

A financial institution that is owned by depositors and specializes in savings accounts and mortgage loans.

commercial bank

A financial institution that offers a full range of financial services to individuals, businesses, and government agencies.

savings and loan association (S&L)

A financial institution that traditionally specialized in savings accounts and mortgage loans.

trust

A legal arrangement through which one's assets are held by a trustee.

open-end credit

A line of credit in which loans are made on a continuous basis and the borrower is billed periodically for at least partial payment.

interest

A periodic charge for the use of credit.

debit card

A plastic access card used in computerized banking transactions; also called a cash card.

revolving check credit

A prearranged loan from a bank for a specified amount; also called a bank line of credit.

money market account

A savings account offered by banks, savings and loan associations, and credit unions that requires a minimum balance and has earnings based on market interest rates.

certificate of deposit (CD)

A savings plan requiring that a certain amount be left on deposit for a stated time period to earn a specified interest rate.

money market fund

A savings-investment plan offered by investment companies, with earnings based on investments in various short-term financial instruments.

credit union

A user-owned, nonprofit, cooperative financial institution that is organized for the benefit of its members.

collateral

A valuable asset that is pledged to ensure loan payments.

asset management account

An all-in-one account that includes savings, checking, borrowing, investing, and other financial services for a single fee; also called a cash management.

credit

An arrangement to receive cash, goods, or services now and pay for them in the future.

overdraft protection

An automatic loan made to checking account customers to cover the amount of checks written in excess of the available balance in the checking account.