Personal finance glossary A-Z

A tax-advantaged savings plan designed to help families save money for future educational costs. There are two types of 529 plans: 529 prepaid tuition plans and 529 savings plans.

Any and all persons designated and authorized to transact business on behalf of an account. Each account holder's signature needs to be on file with the bank. The signature authorizes that person to conduct business on behalf of the account.

ACH stands for Automatic Clearing House, otherwise known as an ACH System/Network. An automatic clearing house is an electronic system that deducts funds from a bank account, processes it, and then transfers the funds to another bank account.

The cost of borrowing money on a yearly basis, expressed as a percentage rate.

A percentage rate reflecting the total amount of interest paid on a deposit account based on the interest rate and the frequency of compounding for a 365-day year.

An item with economic value, such as stock or real estate.

Stands for "automated teller machine," a machine that lets bank customers perform basic transactions, such as deposits and withdrawals.

A checkless system for paying recurring bills with one authorization statement to a financial institution. For example, the customer would only have to provide one authorization form/letter/document to pay the cable bill each month. The necessary debits and credits are made through an Automated Clearing House (ACH).

A financial institution and business that accepts deposits, makes loans, and handles other financial transactions.

Periodically the bank provides a statement of a customer's deposit account. It shows all deposits made, all checks paid, and other debits posted during the period (usually one month), as well as the current balance.

A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract.

A service you set up with a bank, credit union, prepaid card account, or a business you owe money to that lets you pay bills online or through a mobile app.

A check drawn on the funds of the bank, not against the funds in a depositor's account. However, the depositor paid for the cashier's check with funds from their account. The primary benefit of a cashier's check is that the recipient of the check is assured that the funds are available.

A savings tool from a bank or credit union that has a fixed maturity date and a fixed interest rate.

An account at a bank (sometimes called a share draft account at a credit union) that allows you to make deposits, pay bills, and make withdrawals.

A written order instructing a financial institution to pay immediately on demand a specified amount of money from the check writer's account to the person named on the check or, if a specific person is not named, to whoever bears the check to the institution for payment.

Assets that are offered to secure a loan or other credit. For example, if you get a real estate mortgage, the bank's collateral is typically your house. Collateral becomes subject to seizure on default.

When you earn interest on both the money you save and the interest you earn.

A co-signer is a second person who signs a principal borrower's loan. The co-signed is equally responsible for on-time payments of a loan.

The total amount it will cost you to go to school — usually stated as a yearly figure. COA includes tuition and fees; room and board (or a housing and food allowance); and allowances for books, supplies, transportation, loan fees, and dependent care if applicable. It also includes some miscellaneous and personal expenses.

Borrowing money, or having the right to borrow money, to buy something. Usually it means you’re using a credit card, but it might also mean that you got a loan.

Person, business, or organization that loans money to the debtor. Also refers to the company that issues credit cards.

An open-ended loan that allows you to borrow money up to a certain limit and carry over an unpaid balance from month to month. There is no fixed time to repay the loan as long as you make the minimum payment due each month. You pay interest on any outstanding credit card loan balance.

Your credit score, provided by a credit reporting agency, helps a lender determine how likely you are to repay a new loan. To calculate your score, a credit reporting agency considers factors such as how you pay your debts, your outstanding debt, how long you've had credit, the types of credit you've had and how many times you've applied for credit.

A cooperative financial institution that is chartered by the National Credit Union Administration (a federal independent agency) or a state government and is owned by its individual members.

The unauthorized movement or disclosure of sensitive information to a party, usually outside the organization, that is not authorized to have or see the information. Someone who gets the data might use it for identity theft.

A debit may be an account entry representing money you owe a lender or money that has been taken from your deposit account.

A card used to make purchases at businesses (like grocery stores and gas stations) with money in your checking account.

Debt is the amount a borrower owes to their creditors. Debt is one major factor in a borrower’s creditworthiness and credit score.

Someone who owes monies to another party.

A person's debt-to-income ratio (DTI) reflects their total debt due each month against their monthly gross income. Lenders use DTI to help qualify a borrower for a loan.

The amount of expenses the insured must pay before the insurance company will contribute toward the covered item. For example, the amount you pay for covered health care services before your insurance plan starts to pay is your deductible.

Money electronically sent to your bank account, credit union account, or prepaid card.

Money made from working for someone who pays you or from running a business or farm. This includes all the income, wages, and tips you get from working.

The transfer of money between accounts by consumer electronic systems — such as automated teller machines (ATMs) and electronic payment of bills — rather than by check or cash. (Wire transfers, checks, drafts, and paper instruments do not fall into this category.)

A cash reserve that's specifically set aside for unplanned expenses or financial emergencies. Some common examples include car repairs, home repairs, medical bills, or a loss of income.

Someone who organizes, manages, and assumes the risks of a business or enterprise.

Prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, or because an applicant receives income from a public assistance program.

Equity is the difference between the appraised value of a borrower's home and the outstanding amount that the borrower owes to a lender.

A number that is used to compare the value of money in two different countries. For example, you would use an exchange rate to figure out how many pesos or euros you could get for one U.S. dollar.

Ways you use your income, such as saving it, sharing it, and spending it.

The Fair Credit Reporting Act (FCRA) is a federal law that promotes accuracy, fairness and privacy of consumer information maintained by credit reporting agencies.

A government corporation that insures the deposits of all national and State banks that are members of the Federal Reserve System.

Expenses, like bills, that must be paid each month and generally cost the same amount. Some fixed expenses, like a utility bill, may also be variable because the amount changes each month depending on usage.

A fixed interest rate does not fluctuate throughout the life of a loan, unlike an adjustable rate.

An illegal act that occurs when people try to trick you out of your personal information and your money.

A type of financial aid that does not have to be repaid, unless, for example, you withdraw from school and you need to pay back some of the grant money; often need-based.

Gross income refers to the total income before any taxes are deducted.

An account at a bank, insurance company, or other financial institution that lets you set aside pre-tax money, sometimes directly from your paycheck, to pay for eligible medical expenses.

Using your personal information — such as your name, Social Security number, or credit card number — without your permission.

Regular money received from earnings, commissions, investments, rental payments or other sources.

An account in the name of one individual.

The increase in price of consumer goods, usually expressed as a percentage over a specific period of time.

The practice or arrangement in which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.

Amount of money you pay for an insurance policy.

Deposits held in financial institutions that are guaranteed by the Federal Deposit Insurance Corporation (FDIC) against loss due to bank failure.

A percentage of a sum borrowed that is charged by a lender or merchant for letting you use its money. A bank or credit union may also pay you an interest rate if you deposit money in certain types of accounts.

Something you spend your money on that you expect will earn a financial return.

An account owned by two or more persons. Either party can conduct transactions separately or together as set forth in the deposit account contract.

An organization or person that lends money with the expectation that it will be repaid, generally with interest.

A pre-approved loan authorization with a specific borrowing limit based on creditworthiness. A line of credit allows borrowers to obtain a number of loans without re-applying each time as long as the total of borrowed funds does not exceed the credit limit.

Money lent from a financial institution to a creditworthy borrower for a specified period of time and at a particular interest rate.

Length of the loan, at the end of which the loan must be completely repaid.

A service that allows you to use your smartphone or tablet to manage your bank or credit union account without the aid of a teller. Generally, you can deposit checks into your account using this service, but not cash.

A written document evidencing the lien on a property taken by a lender as security for the repayment of a loan. The term "mortgage" or "mortgage loan" is used loosely to refer both to the lien and the loan. In most cases, they are defined in two separate documents: a mortgage and a note.

Basic things people must have to survive (such as food, clothing, and shelter), resources they may need to do their jobs (such as reliable transportation and the tools of the trade), and resources to help build and protect their money and property so they can meet future needs (such as emergency savings and insurance).

Amount of money you receive in your paycheck after taxes and other deductions are taken out; also called take-home pay.

Measure of your financial stability or wealth calculated by subtracting your liabilities from your assets.

A service that allows you to use a secure website to manage your bank or credit union account without the aid of a teller. While you can transfer money between accounts using this service, you generally cannot deposit checks or cash.

The expenses and losses that are not reimbursed by insurance. This cost includes deductibles, copayments, and amounts paid for services or repairs that are excluded from coverage. It’s the amount paid before insurance coverage kicks in.

An overdraft occurs when you don’t have enough money in your account to cover a transaction, but the bank pays the transaction anyway.

Generally a four-character number or word, the PIN is the secret code given to credit or debit cardholders enabling them to access their accounts. The code is either randomly assigned by the bank or selected by the customer. It is intended to prevent unauthorized use of the card while accessing a financial service terminal.

The activity of defrauding an online account holder of financial information by posing as a legitimate entity.

A written instrument which authorizes one person to act as another's agent or attorney. The power of attorney may be for a definite, specific act, or it may be general in nature. The terms of the written power of attorney may specify when it will expire. If not, the power of attorney usually expires when the person granting it dies. Some institutions require that you use the bank's power of attorney forms. (The bank may refer to this as a Durable Power of Attorney: The principal grants specific rights to the agent).

Prime rate is the interest rate that often serves as the benchmark for setting interest rates on home equity lines of credit and other variable rate loans.

Amount of money you borrow and must pay back, usually with interest.

A nine-digit number that identifies the financial institution associated with a bank account. It can also be called an ABA number or routing number. The bank routing number is generally located on the bottom left corner of a check, right before the bank account number. The bank routing number may also be found on bank and credit union account statements, websites, and mobile apps. A bank routing number is not the same as a bank account number.

Money you have set aside in a secure place, such as in a bank account, that you can use for future emergencies or to make specific purchases.

An account at a bank (sometimes called a share savings account at a credit union) used to set aside money and that pays you interest.

Provides benefits for retired workers and people with disabilities, as well as the unmarried children, surviving spouses, or former spouses (in certain cases) of both.

The act of using money to buy goods or services.

A type of investment that gives people a share of ownership in a company.

Required payments of money to governments, which use the funds to provide public goods and services for the benefit of the community as a whole.

A dollar-for-dollar reduction in a tax. It can be deducted directly from taxes owed. Tax credits can reduce the amount of tax you owe or increase your tax refund, and some credits may result in a refund even if you don't owe any tax.

An amount (often a personal or business expense) that reduces income subject to tax.

A general term that covers all types of accounts in a trust department, such as estates, guardianships, and agencies.

Unbanked households don’t have a checking or savings account at an institution that is insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA).

Expenses that change in amount from month to month.

Any interest rate or dividend that changes on a periodic basis.

Upgrades and other things that would be nice to have but aren’t necessary for living, income, or protecting what you have.

Wire transfer is an electronic transfer of money from one bank to another bank account, either domestically or internationally.

Money that employers withhold from employees’ paychecks. This money is deposited for the government and is credited against the employees' tax liability when they file their returns. Employers withhold money for federal income taxes, Social Security and Medicare taxes, and state and local income taxes in some states and localities.

Form an employer provides to employees that includes the amount of money earned from the employer and taxes that were withheld for the previous year.

Form you complete and provide to your employer so that your employer can withhold the correct amount of federal income tax from your pay.

A year-end statement (Form 1098) is a report prepared by the lender. It shows how much was paid in interest and taxes during the year, as well as the remaining mortgage loan balance.