Banking vocabulary Flashcards
529 plan
qualified tuition plan that provides families a federal tax-free way to save money for college.
APR
this stands for annual percentage rate/ which is a number calculated by taking into account the total cost of the loan/ including what the borrower will pay in interest. this makes it easier to compare different loan offers
asset transformation
process of risk sharing through which risky assets are turned into safer assets for investors
adverse selection
A high-risk person benefits more from insurance/ so is more likely to purchase it.
moral hazard
the loss to an insurance company resulting from possible lack of prudence or honesty on the part of policyholders
credit rationing
the restricting of credit by lenders such that borrowers cannot obtain the funds they desire at the given interest rate
installment loans
loans repaid in regular payments over a period of time
secured loan
a loan backed by something valuable/ such as property
collateral
a security pledged for the repayment of a loan
lien
the right to take another’s property if an obligation is not discharged
unsecured loan
A loan made on the signature and credit of the borrower/ not secured by collateral. Credit card. (Debenture)
open-end loan
A mortgage loan that is expandable by increments up a maximum dollar amount/ the full loan being secured by the same original mortgage
grace period
a time period during which no finance charges will be added to your account
capital gain
the amount by which the selling price of an asset exceeds the purchase price
capital loss
the amount by which the purchase price of an asset exceeds the selling price
cash flow
the excess of cash revenues over cash outlays in a give period of time (not including non-cash expenses)
annual fee
An amount that credit card companies can charge for the use of a credit card.
annual percentage rate
the total cost of credit expressed as a yearly percentage
bad credit
a situation in which lenders believe that/ due to a borrowers poor history of repaying his or her debts/ further loans to this person would be especially risky.
bankruptcy
a legal process intended to insure equality among the creditors of a corporation declared in bankruptcy
capacity
the maximum production possible
capital
wealth in the form of money or property owned by a person or business and human resources of economic value
cardholder agreement
a written contract that sets forth the terms that apply to a credit or charge card account/ including the interest rate charged/ the method of calculating interest and any annual or transaction fees
character
the inherent complex of attributes that determine a persons moral and ethical actions and reactions
collateral
a security pledged for the repayment of a loan
collection agency
An organization that obtains or arranges for payment of money owed to a third party
conditions
Circumstances that affect a situation
credit
an accounting entry acknowledging income or capital items
credit report
a report on a person’s creditworthiness that includes identifying information/ credit cards/ late payments/ bankruptcies/ and savings balances
equal credit opportunity
unlawful to discriminate because of sex or marital status
foreclosure rescue
try to make people sign off on their foreclosed homes
establishing credit
Even if one spouse has good credit established/ then it’s still important for the other spouse to establish credit in their own name.
fees
Service fees for use of the checking account/ built into the service agreement.
finance charge
is the total dollar amount you pay to use credit.
good credit
a situation in which lenders are willing to make loans to an individual/ due to his or her good history of repaying debts.
guarantee
a written assurance that some product or service will be provided or will meet certain specifications
installment credit
a loan repaid with interest in equal periodic payments
installment loan
a loan repaid with interest in equal periodic payments
late fees
Additional fees that can be added to a credit card bill if the card holder fails to make at least the minimum payment by the due date.
lender
someone who lends money or gives credit in business matters
net worth
total assets minus total liabilities
required payment
least amount of money needed to be paid for loans
revolving credit
a consumer credit line that can be used up to a certain limit or paid down at any time
secured credit card
a credit card that requires you to make a deposit to the card issuer/ credit limit is typically the amount of your deposit/ often $500
spending limit
refund of the purchase price of an item.
term
a limited period of time
unpaid balance
the amount of a loan that has not yet been paid
