Personal Finance Unit 4: Credit

Credit Unions

A not-for-profit institution that is owned by members and organized for their benefit.

Credit Score

A number assigned to a person that indicates to lenders their capacity to repay a loan.

Closed-End Credit

A one-time loan that you will pay back over a specified period of time in payments of equal amounts. Examples include a mortgage, vehicle loan, and installment loans.

Pay Day Loans

A relatively small amount of money lent at a high rate of interest on the agreement that it will be repaid when the borrower receives their next paycheck.

Checking account

Account held at a bank or credit union into which account owners deposit funds.

Overdraft

Account holder does not have enough money to cover transactions from checks, ATM withdrawals, debit card purchases, or electronic payments.

Balance

Amount available in an account for withdrawal or use.

Annual Percentage Yield

Amount of interest that a $100 deposit would earn, after compounding, for one year.

Liquidity

How quickly an asset can be turned/changed into cash.

Other Financial Services

Includes insurance, investments, income tax assistance, and financial planning.

Open-End Credit

Loan with a certain limit on the amount of money you can borrow. Examples include credit cards.

Credit Line

Maximum amount of money a borrower can charge on, or withdraw from, a particular credit account.

Borrowing

Obtaining money for a short term or long term loan.

Pawn Shop

Offers secured loans to people, with items of personal property used as collateral.

Automatic Electronic Transfer

Online payment that is automatically deducted from the account balance on a recurring basis.

Five Credit Score Factors

Payment History, Amounts Owed, Length of Credit History, New Credit, Types of Credit Used.

Rate of Return

Percentage of increase in the value of your savings from earned interest.

Compounding Interest

Process in which interest is earned on both the principal and the amount deposited.

APR

The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan.

Minimum Payment

The smallest amount of a credit card bill that a consumer can pay, to remain in good standing with the credit card company.

Payment Services

Transferring money from a personal account to a business or individual.

Capital

What are your assets and net worth?

Collateral

What assets do you have to secure the loan?

Conditions

Who is your employer?

Savings

storage of funds for future use.

Check Cashing Oulet

A check cashing service is a company that will cash a check for a fee.

Banks

A for-profit institution that offers a range of financial services.

Debit Card

"Pay now" point-of-sale transaction card that replaces cash and checks.

Rent-to-Own Centers

An arrangement between a consumer and a seller that allows the consumer to rent furniture, appliances and other goods for a defined period of time.

ATM (Automated Teller Machine)

An electronic banking service that allows customers to obtain cash and check account balances.

Cash Back/Rewards

An incentive program operated by credit card companies where a percentage of the amount spent is paid back to the card holder.

Annual Fee

Any fee that is charged on an annual (yearly) basis.

Character

Are you trustworthy and stable?

Capacity

Can you repay the loan?

Direct Deposit

automatic deposit of net pay to a designated bank account.