Remitly Finance Terms: A Glossary for Everyone

A 529 plan is a savings account sponsored by a U.S. state or educational institution that offers tax advantages for education costs. Contributions are made with after-tax dollars, but earnings grow free from federal income tax, and qualified withdrawals, tuition, fees, books, room and board, aren’t taxed at the federal level.

A 529 prepaid tuition plan lets you purchase tuition credits at a participating school, or a set of schools, at today’s price for use in the future, protecting you from tuition increases between now and when the student enrolls. Instead of investing your money and hoping it grows enough to keep pace with rising tuition, a prepaid plan sidesteps that question entirely: you pay for a defined amount of future tuition today, and the plan generally covers that tuition later, regardless of how much prices rise in the meantime.

Accounts payable (AP) is the total amount a business owes to its suppliers, vendors, or contractors for goods and services it has received but not yet paid for. These short-term liabilities are typically due within 30, 60, or 90 days and appear on a balance sheet as a current liability. It’s distinct from accounts receivable, which tracks money owed to your business.

Accounts receivable (AR) is the total amount a business is owed by its clients or customers for goods or services delivered but not yet paid for. These amounts are recorded as a current asset on the balance sheet and are typically expected to be collected within 30, 60, or 90 days. Each unpaid invoice is an accounts receivable, and the sum of all outstanding invoices is your total AR balance. It’s distinct from accounts payable, which tracks money your business owes to others.

An ABA number is a nine-digit code assigned to U.S. banks and credit unions by the American Bankers Association. It identifies the specific financial institution involved in a transaction, not the individual account, but the bank itself. You’ll also hear it called a routing number, a routing transit number (RTN), or a bank routing number; all of these terms refer to the same nine-digit identifier.

AML stands for anti-money laundering, the laws and processes financial institutions use to prevent illegally obtained money from being moved through legitimate channels and made to look like it came from a legal source. According to the Financial Crimes Enforcement Network⁠(opens in new window), the Bank Secrecy Act requires financial institutions to help detect and prevent money laundering, including keeping certain records and reporting specific types of transactions to the government.

Annual return is the percentage gain or loss on an investment over a one-year period, calculated by comparing its value at the start and end of that year, including any income like dividends or interest received along the way.

A loan’s interest rate is the cost paid to the lender for borrowing money, expressed as a percentage. APR, or annual percentage rate, is a broader measure that includes the interest rate plus additional fees charged with the loan, such as origination charges. Because it includes more of the total cost, APR is usually higher than the interest rate alone, and it’s the number more useful for comparing different loan offers fairly.

An asset is anything of financial value that you own, including cash, property, investments, and equipment. Assets are generally split into two broad categories: current assets, such as cash or savings that can be converted to money quickly, and fixed assets, such as property or vehicles, which are held over a longer period and aren’t meant to be sold right away.

Asset allocation is the strategy of dividing your money across different categories of investments, such as stocks, bonds, and cash, based on your goals, timeline, and comfort with risk. The SEC’s Office of Investor Education explains that the mix which works best for you changes at different times in your life, depending mainly on your time horizon and risk tolerance.

Asset value is the estimated worth of something you own at a particular moment, whether that’s a piece of property, an investment, or a business asset. Because market conditions shift, asset value isn’t fixed. A property’s value might rise or fall with the local real estate market, while an investment’s value moves with the broader market or the performance of the specific company or fund.

An associate’s degree is an undergraduate credential typically completed in about two years of full-time study, commonly offered by community colleges, though some four-year universities offer them as well. It can serve as a standalone credential for entering the workforce or as a stepping stone toward a bachelor’s degree, with many credits transferring toward a four-year program.

An ATM, or automated teller machine, is a self-service machine that lets someone withdraw cash, check a balance, and perform other basic banking tasks without visiting a bank branch. For someone receiving an international transfer as a bank deposit or to a card, the ATM is frequently the final, practical step where the money actually becomes usable cash.

An ATM balance inquiry fee is a charge some banks or ATM operators apply specifically for checking an account balance at a machine, separate from any fee for actually withdrawing cash. This fee can apply even when deciding not to withdraw money after checking, and it’s more commonly seen at machines outside a bank’s own network, including internationally.

An ACH transfer is an electronic payment that moves money between bank accounts in the United States through the Automated Clearing House network, a system that banks and credit unions use to process payments in batches rather than one at a time. ACH transfers are commonly used for direct deposit, bill payments, and moving money between accounts, and they typically settle within one to a few business days rather than instantly.

An automatic credit or debit is a bank transaction that’s preauthorized to occur on a recurring schedule, such as weekly, monthly, or on a specific date, without approving each individual transaction. A credit adds money to an account, like a direct deposit paycheck, while a debit removes money, like a recurring loan or subscription payment. Both rely on authorization granted in advance, which federal rules require to be in writing or a similarly verifiable form before a bank or payee can begin pulling recurring payments from an account. That same rule generally requires a copy of the authorization to be provided as well, giving a record to refer back to if a dispute comes up later.

A bachelor’s degree, also called a baccalaureate degree, is an undergraduate credential typically completed after about four years of full-time study. It’s the standard qualification for entry into many professional fields and is often a prerequisite for graduate study.

A balance sheet is a financial statement that shows what a business or individual owns (assets), what they owe (liabilities), and the difference between the two (equity), all as of a specific date. It follows a simple rule: assets must always equal liabilities plus equity, which is why it’s called a “balance” sheet.

A bank account is a financial account held at a bank or credit union for depositing, withdrawing, and managing money. Most banks offer several account types, most commonly checking accounts for everyday transactions and savings accounts for money set aside, and both are typically protected by federal deposit insurance up to applicable limits.

A bank account number is a unique identifier assigned by a bank to a specific account. In the United States, account numbers are typically 8 to 12 digits long, though some banks use longer formats. This number is what directs deposits, withdrawals, and transfers to the correct account, distinct from any card number or routing number associated with that same account.

A bank deposit is money credited directly into a bank account. In the context of an international money transfer, it’s a delivery method: the funds sent by one person are received by another as a deposit into their checking or savings account.

A bank transfer is an electronic movement of money directly between bank accounts, initiated through a bank, credit union, or money transfer provider rather than handed over as cash or a paper check. For international transfers, a bank transfer often plays two roles: it’s how a sender funds the transaction from their own bank account, and it’s frequently the delivery method a sender chooses to send money directly into a recipient’s account abroad.

Bankruptcy is a legal process that allows a person or business unable to repay their debts to have some or all of that debt eliminated or reorganized under court supervision. It’s filed through the federal court system and is available to anyone who meets the legal requirements, regardless of income level or immigration status.

A bill-payment service is a tool, typically offered through a bank or a dedicated app, that lets someone pay recurring bills electronically rather than manually with a check or in person. It centralizes multiple payees in one place, sometimes allowing scheduled or automatic payments so a bill is paid on time each cycle without manual action.

Bimonthly is an ambiguous term that can technically mean either twice a month or once every two months, since the prefix “bi” can be interpreted either way depending on context. Because of this built-in ambiguity, many people and even some employers use “bimonthly” loosely to describe a semi-monthly pay schedule, paid twice a month, even though the more precise term for that specific schedule is semi-monthly, not bimonthly.

A bond is a debt security, similar to an IOU, bought when lending money to a government, municipality, or corporation. In return, the issuer promises to pay a specified rate of interest during the life of the bond and to repay the principal, also called the face value, when the bond matures.

A bookkeeper is responsible for the day-to-day recording of a business’s financial transactions, including sales, expenses, payroll, and payments to and from vendors or clients. This work forms the foundation that financial statements and tax filings are built on. A bookkeeper is generally distinct from an accountant, who typically focuses on higher-level analysis, tax strategy, and preparing formal financial statements from the bookkeeper’s records.

A borrower is the individual or entity that takes on a loan or line of credit, agreeing to repay the amount borrowed, typically with interest, according to specific terms. This applies whether you’re taking out a car loan, a mortgage, or opening a credit card, since each involves the borrower agreeing to a set of repayment obligations. A lender is the other side of that relationship, the party providing the funds and setting the terms the borrower agrees to.

According to the CFPB⁠(opens in new window), building a budget starts with getting a complete picture of where money comes from, then logging spending to see a realistic picture of where it actually goes each month. A budget is a plan that matches income against expenses over a specific period, typically a month, helping to see clearly what’s affordable, what needs cutting back, and how much is genuinely left over for savings or other goals. At its core, a budget is simply a structured way of answering one question: where is money actually going, and does that match where it’s supposed to go.

A business bill-payment service is a tool, often built into accounting software or offered by a bank, that automates the process of paying vendors, suppliers, and other recurring business obligations. Instead of manually initiating each payment, you set up the payee once and schedule payments to recur automatically or with minimal manual steps each cycle.

A business credit report is a record of a company’s credit history, including loans, credit lines, and payment history with vendors and suppliers who report that activity. It’s separate from the owner’s personal credit report, though for a new or small business, lenders sometimes look at both when making a decision.

A business credit score is a number, calculated by a business credit bureau, that summarizes a company’s creditworthiness based on factors like payment history, credit utilization, and length of credit history. Unlike personal credit scores, which follow a fairly standardized model, business credit scoring varies more between bureaus.

Business income is the revenue a business earns from its normal operations, minus the direct cost of producing the goods or services sold. It’s reported separately from personal income, and for many small business structures, it flows through to the owner’s personal tax return but is still calculated and tracked as a distinct category.

A business plan is a written document that describes a business’s idea, target market, operations, and financial projections. It’s used to clarify the owner’s own thinking, communicate the business to potential lenders or investors, and provide a reference point as the business grows and changes.

A buying plan is a strategy for saving toward a specific purchase, such as a vehicle, a piece of equipment, or property, by setting a target amount, a timeline for reaching it, and a regular savings amount that gets there on schedule. Rather than vaguely hoping to afford something eventually, a buying plan turns the goal into a specific, trackable number to actually work toward each month. According to the CFPB⁠(opens in new window), setting a specific goal, putting a plan into action for a trial period, then making the savings automatic are the three core steps behind any structured savings goal, and a buying plan is simply that framework applied to a single, defined purchase.

According to the U.S. Bureau of Labor Statistics⁠(opens in new window), purchasing power is the amount of goods and services that can be purchased with a unit of currency, and it changes over time as prices rise or fall. Buying power is a more meaningful measure than the raw number itself, since the same face-value amount can buy considerably more or less depending on prevailing prices. A hundred units of currency doesn’t have a fixed, constant buying power; it has whatever buying power current prices allow, and that figure shifts over time.

Capital refers to the financial resources, money and sometimes assets, that a business uses to fund its operations, purchase equipment, or grow. It can come from several sources: the owner’s personal savings, loans from a bank or other lender, or equity investment from outside investors in exchange for a share of ownership.

A capital gain is the profit realized when selling an asset, such as property, stock, or a business interest, for more than its original purchase price, known as the cost basis. Capital gains are generally categorized as short-term, for assets held a year or less, or long-term, for assets held longer, and the two are often taxed at different rates.

A capital loss happens when an asset, such as property, stock, or a business interest, sells for less than its original purchase price, known as the cost basis. Like capital gains, capital losses are generally only “realized,” and therefore relevant for tax purposes, once the asset is actually sold, not simply because its value has declined while still held.

A card replacement fee is a charge some card issuers apply when replacing a card due to loss, theft, damage, or expiration. It can apply to debit cards, credit cards, and prepaid cards alike, though the specific amount and circumstances that trigger it vary by issuer.

Cash flow is the actual movement of money into and out of a business over a given period, as opposed to profit, which is an accounting figure that can include revenue not yet collected or expenses not yet paid. A business can show a profit on its income statement while still experiencing a cash shortage if, for example, clients are slow to pay or a large expense comes due before revenue arrives.

A cash flow projection is a forecast of the cash expected to move in and out of a business over a future period, typically weeks or months ahead. It’s built from expected inflows, such as sales revenue and payments from clients, and expected outflows, such as payroll, rent, and vendor payments, giving a forward-looking view of whether the business will have enough cash on hand when it’s needed.

Cash pickup is a delivery method for international money transfers that lets a recipient collect physical currency from a specific location, like a bank or agent, instead of having it deposited into an account. The recipient collects the funds in person after presenting valid identification.

Cashing out means converting a digital balance, such as a completed money transfer, into physical cash that can actually be held and spent. For a transfer recipient, this is often the final step, turning a transfer confirmation into money in hand at a bank, an agent location, or an ATM.

A certificate of deposit is a type of savings account offered by banks and credit unions that holds a fixed sum of money for a set term, commonly ranging from a few months to several years, in exchange for a fixed interest rate that’s usually higher than a standard savings account. In exchange for that higher rate, the account holder generally agrees not to withdraw the money until the term, known as the maturity date, ends.

A chargeback is a reversal of a card charge, initiated through the card issuer rather than negotiated directly with the merchant. It’s a built-in consumer protection for card payments, designed to give a path to recover funds when a transaction was unauthorized, when a merchant failed to deliver what was promised, or when a clear billing error occurred.

A checking account is a type of bank account designed for frequent, everyday use, including debit card purchases, online bill payments, and receiving direct deposits. Unlike a savings account, a checking account typically doesn’t limit how often money can be withdrawn or spent, and it usually earns little to no interest.

A closed-loop card is a card that can only be used at a specific merchant, or a specific group of affiliated merchants, rather than being accepted broadly. According to the CFPB’s definitions for prepaid cards, a closed-loop card might be good only at a particular store, group of stores, or a public transportation system, and most closed-loop cards don’t carry a payment network logo.

Coinsurance is the percentage of costs for a covered health care service paid after the deductible, often around 20 percent. If a plan has 20 percent coinsurance, insurance pays 80 percent of an eligible bill and the remaining 20 percent is owed, once the deductible has already been satisfied for the year.

A college savings plan is a dedicated financial account designed specifically to help families save for future education expenses, often with tax advantages that make it more efficient than a standard savings account for this specific purpose.

According to the FTC⁠(opens in new window), comparison shopping means checking out sellers and products, then keeping records of purchases so a seller can be held to its promises. Comparison shopping means checking prices, terms, and quality across more than one seller or provider before making a purchase, rather than buying from the first option encountered. The underlying principle is simple: identical or similar products and services frequently carry meaningfully different prices depending on where they’re offered, and taking the time to compare protects against paying more than necessary for something that could have been found equally well elsewhere.

Compound growth happens when a return is earned on money invested as well as on the return that invested money has already earned. Compound interest is interest earned on interest, and over time, it’s one of the most powerful forces in personal finance, since it means money can grow at an accelerating pace rather than a flat, steady one.

A consumer is an individual who purchases or uses goods and services for personal, family, or household purposes, rather than for resale or in the course of running a business. This distinction matters legally, since many consumer protection laws specifically apply to purchases made in this personal capacity and don’t extend the same way to a business-to-business transaction, where both parties are generally assumed to have more equal bargaining power and sophistication.

According to the Bureau of Labor Statistics⁠(opens in new window), the Consumer Price Index is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Published monthly, it’s the most widely referenced measure of inflation in the United States, used by economists, policymakers, and everyday consumers alike to understand how quickly the cost of living is changing.

Copayment is a fixed amount paid for a covered health care service, usually at the time care is received. Unlike coinsurance, which is a percentage, a copay is typically a set dollar amount, often collected at the time of the visit itself.

Cost of attendance, or COA, is the estimated total cost of attending a specific school for one year, calculated by that school according to federal guidelines. It includes tuition and fees, along with estimated costs for housing, food, books, supplies, transportation, and personal expenses, giving a fuller picture than tuition alone.

Cost-effective describes an option that achieves the best possible outcome or result relative to what it costs, rather than simply being the cheapest option on the table. A genuinely cost-effective choice balances price against quality, reliability, and how well the option actually serves a specific need, since the lowest-priced option sometimes ends up costing more overall if it fails to deliver adequately or requires costly workarounds later.

A credit card lets the holder borrow money from the card issuer up to a credit limit, repaying it later with interest if the balance isn’t paid in full. When used to fund an international money transfer, a credit card payment can sometimes be treated differently by the issuer than an ordinary purchase, which is the key thing to understand before choosing it as a payment method.

A credit card statement is a monthly summary of account activity, including purchases, payments, fees, and interest charged during a specific billing period. It shows the current balance, the minimum payment due, the payment due date, and the APR that applies to the account, among other details required by law to be disclosed. Statements typically also show a previous balance, payments and credits applied during the period, and year-to-date totals for fees and interest, giving a fuller picture than the current balance alone.

Credit history is the record of past borrowing and repayment activity, including credit cards, loans, and other credit accounts, along with whether payments were made on time. This information is compiled into a credit report, and a credit score is then calculated from that report’s contents. A thin file, meaning very little recorded activity, is different from a bad one; a lender looking at a thin file simply has less information to go on, not evidence of a poor track record.

A credit limit is the maximum balance a lender allows on a credit account, such as a credit card or a line of credit. It’s determined by the lender based on factors including credit history, income, and existing debt obligations, and it can change over time as a financial profile evolves. Different account types set limits somewhat differently: a secured card’s limit is often tied directly to a cash deposit, while an unsecured card or line of credit relies more heavily on income and credit history alone.

A credit line is a flexible borrowing arrangement that lets you draw funds up to an approved limit as needed, rather than receiving the full amount as a lump sum. Interest generally applies only to the portion actually borrowed, and as it's repaid, that amount becomes available to borrow again, similar to how a credit card⁠(opens in new window) works, according to the CFPB⁠(opens in new window).

A credit score is a number, typically between 300 and 850, that predicts how likely you are to repay a loan on time, based on the information in your credit report. Lenders use it to decide whether to extend credit and on what terms, including the interest rate you’re offered. Crucially, credit history represents the raw track record of your borrowing and repayment activity, whereas a credit score is a numerical value calculated from that history using a specific scoring model. While you need a credit history to generate a meaningful credit score, they remain distinct concepts.

A credit union is a not-for-profit financial cooperative that’s owned by its members rather than by outside shareholders. Because credit unions don’t need to generate profit for shareholders, they often pass savings on to members in the form of lower fees and more competitive interest rates on savings and loans. Membership is usually limited to people who meet certain criteria, such as living in a specific area, working for a particular employer, or belonging to an associated community group.

Credit utilization ratio is the percentage of available credit currently in use, calculated by dividing total balances by total credit limits across accounts. According to the FTC, scoring systems generally look at how close a balance sits to its credit limit, and being maxed out or close to it tends to work against a score.

Creditworthy describes someone a lender assesses as a reasonable risk to extend credit to, based on evidence that they’re likely to repay what they borrow according to the agreed terms. This assessment typically draws on credit history, income, existing debt, and sometimes other factors specific to the lender and the type of credit involved.

Cryptocurrency is a digital form of money that exists only electronically, with no central bank or government backing its value. As an investment, buying cryptocurrency means purchasing a digital asset whose price is determined entirely by market supply and demand, with no underlying cash flow, dividend, or interest payment the way a stock or bond typically provides. Unlike a traditional currency transfer, most cryptocurrency transactions are also irreversible once completed, meaning there’s typically no equivalent to a chargeback or refund process if something goes wrong, a feature that matters both for investors and, as covered further below, for anyone targeted by a scam.

Cryptocurrency spoofing is a scam in which fraudsters create a fake version of a legitimate cryptocurrency platform, app, or exchange, closely imitating its branding, layout, and even its displayed account balances, to trick victims into depositing funds or sharing sensitive account information. Unlike a simple phishing email, a spoofed platform can function convincingly for days or weeks, showing a victim what appears to be a growing, legitimate balance the entire time.

A currency code is a standardized three-letter abbreviation that identifies a specific national currency in financial transactions, such as USD for the U.S. dollar, MXN for the Mexican peso, or PHP for the Philippine peso. The International Organization for Standardization confirms that these codes follow the ISO 4217 international standard, ensuring the same three letters mean the same currency no matter where in the world a transaction takes place.

A cutoff time is the specific time of day by which a transfer generally needs to be submitted in order to begin processing that same business day. Transfers submitted after the cutoff time are typically queued for processing on the next business day instead, which can add a day or more to when a recipient actually receives the money.

A data breach happens when unauthorized individuals gain access to sensitive personal or financial data held by a company, government agency, or other organization. This can include names, addresses, Social Security numbers, account numbers, passwords, or other information that, in the wrong hands, could be used to commit fraud or identity theft.

A debit card is a payment card linked directly to a bank account, drawing on the existing balance rather than extending credit the way a credit card does. Using a debit card for a purchase or a transfer moves money out of the account in real time, without accruing interest or debt the way an unpaid credit card balance would.

Debt is an amount of money owed by one party to another, typically under an agreement to repay it, often with interest, according to specific terms. It takes many forms, including credit card balances, installment loans, and mortgages, and it plays a normal, often necessary role in most people’s financial lives.

Debt consolidation is the process of combining multiple debts, such as several credit card balances, into a single new loan or payment. The goal is typically to simplify repayment into one monthly payment and, ideally, secure a more favorable interest rate than the combined rates on the original debts. It can take a few different forms, including a personal loan used to pay off other balances, a balance transfer to a single lower-rate card, or, less commonly, a home equity loan, each with its own tradeoffs.

Debt financing is raising money for a business by borrowing, whether through a bank loan, a line of credit, or another lending arrangement, with the obligation to repay the principal plus interest over time. Unlike equity financing, debt financing doesn’t require giving up any ownership of the business, but it does create a fixed repayment obligation that exists regardless of how the business performs.

A depository institution is a financial organization that’s legally authorized to accept and hold deposits from customers, such as a bank, a credit union, or a savings institution. Because these organizations are regulated and typically carry federal deposit insurance, money held at a depository institution is protected up to applicable limits if the institution were to fail.

A digital transfer is a method of sending money electronically from one party to another, initiated and processed online or through a mobile app rather than by using physical cash or a paper check. The money moves through electronic banking and payment networks, and the entire process, from initiating the transfer to confirming delivery, typically happens digitally. This is different from a transaction where a sender provides physical cash to an agent in person, even if that agent then processes the transfer electronically on the back end, since the term generally describes the sender's own experience of initiating and funding the transfer.

A digital wallet is an app or online service that stores payment information, and in many cases funds themselves, electronically rather than requiring a physical card. It can be used to make purchases, receive payments, and in many cases, receive an international money transfer directly, depending on the specific wallet and the corridor involved.

Direct deposit is a method of electronically transferring money, most commonly a paycheck, directly into a bank account, without the need for a paper check. It relies on the Automated Clearing House (ACH) network to move the funds and typically requires the payer, such as an employer, to have the account and routing numbers on file.

A dividend is a portion of a company’s profit paid to shareholders. Public companies that pay dividends usually do so on a fixed, regular schedule, though they can issue an unscheduled payment, sometimes called a special or extra dividend, at any time.

A domestic money transfer moves money between accounts or recipients located in the same country, with no currency conversion involved anywhere in the process.

Earned income is money received in exchange for performing work or providing a service, including wages, salaries, tips, commissions, and self-employment income. According to the IRS⁠(opens in new window), earned income generally means wages, salaries, tips, other taxable employee pay, and net earnings from self-employment, and it’s distinct from unearned income, which includes investment-type income such as interest, dividends, and capital gains, along with certain other passive sources like pensions and Social Security benefits.

Elder financial exploitation is the illegal or improper use of an older person’s money, property, or assets, often carried out by someone in a position of trust, including a family member, caregiver, or new acquaintance, though it can also come from a complete stranger running a scam. It’s considered a form of elder abuse and is a genuinely underreported problem, partly because victims may feel embarrassed, dependent on the person exploiting them, or afraid of straining a family relationship.

According to the CFPB⁠(opens in new window), an emergency fund is a cash reserve specifically set aside for unplanned expenses or financial emergencies, such as car repairs, home repairs, medical bills, or a loss of income. Without this kind of dedicated reserve, even a relatively minor financial shock can force debt or falling behind on other obligations, turning a temporary setback into a longer-lasting financial problem.

An Employer Identification Number, or EIN, is a nine-digit number issued by the IRS to identify a business for federal tax purposes. It functions similarly to a Social Security number, but for a business rather than an individual, and is generally required to open a business bank account, hire employees, or file certain types of business tax returns.

Endorsing a check means signing the back of it, in the designated endorsement area, to authorize it being cashed or deposited. This signature confirms that the person the check is made out to is directing the bank to process it, either by providing cash or crediting an account.

An entrepreneur is a person who identifies a business opportunity and takes on the financial and operational risk of starting and running a venture to pursue it. This can range from a small, single-owner service business to a larger company with employees and multiple revenue streams, but the defining feature is taking on that initial risk in the hope of building something sustainable.

Equity financing is raising money for a business by selling a percentage of ownership to an investor, in exchange for capital that doesn’t need to be repaid the way a loan does. In exchange for their investment, the investor becomes a part-owner of the business, typically sharing in future profits or the proceeds if the business is later sold.

According to the IRS⁠(opens in new window), the estate tax is a tax on the right to transfer property at death, based on an accounting of everything owned or held certain interests in at the date of death, valued at fair market value rather than original purchase price. This total is called the gross estate, and after allowable deductions, the taxable estate, the actual amount potentially subject to tax.

Estimated arrival time, or ETA, is the projected date and sometimes time by which a money transfer is expected to be available to the recipient. It’s calculated based on factors like the destination country, the delivery method chosen, and when the transfer was submitted, but it remains an estimate rather than a guarantee, since a range of factors can affect actual delivery time.

An exchange rate is the rate at which one currency can be converted into another. When you send money internationally, the exchange rate applied to your transfer determines how much of the destination currency your recipient actually receives for the amount you send. Exchange rates move constantly⁠(opens in new window) based on global currency markets, so the rate available at one moment can differ from the rate available even a few hours later.

An exchange rate lock is a feature that fixes the exchange rate⁠(opens in new window) applied to a transfer for a defined period, protecting the sender from rate movement during that window. Instead of the rate being determined at the moment a transfer is completed, a rate lock sets it in advance, which can matter when planning ahead and wanting to know exactly what a transfer will cost before being ready to send.

Expected family contribution, commonly abbreviated EFC, was the term used for the number calculated from FAFSA information, estimating a family’s capacity to contribute toward college costs. Federal Student Aid’s own guidance confirms this term has since been replaced with Student Aid Index, or SAI, starting with the 2024–25 award year, as part of a redesign of the FAFSA form under the FAFSA Simplification Act. Many people, and some older resources, still refer to the concept by its former name, which is why both terms may be encountered depending on when a particular guide or school document was written.

FAFSA stands for the Free Application for Federal Student Aid, the form used to determine eligibility for federal grants, loans, and work-study programs, as well as many state and institutional aid programs. According to Federal Student Aid, completing the FAFSA form is free and is required to access federal financial aid, and it’s worth renewing each school year since financial situation and aid eligibility can change from one year to the next.

Federal income tax is collected by the IRS on income earned within the U.S. and, depending on specific tax residency status, potentially on income earned elsewhere too. The U.S. uses a progressive bracket system, meaning different portions of income are taxed at increasing rates as income rises, rather than the entire income being taxed at a single flat rate. Most employees have federal income tax withheld directly from each paycheck, based on the information provided on Form W-4, with any difference between what was withheld and what’s actually owed reconciled when filing an annual return.

According to the U.S. Department of Labor⁠(opens in new window), the federal minimum wage for covered nonexempt employees is set under the Fair Labor Standards Act, and many states also have their own minimum wage laws. When an employee is subject to both state and federal minimum wage laws, they’re entitled to whichever rate is higher, meaning the federal rate functions as a nationwide floor rather than the rate that necessarily applies to any specific job.

Federal student loans are loans funded by the U.S. government, offered to eligible students to help cover education costs, generally with more favorable terms and more flexible repayment options than private loans. According to Federal Student Aid, federal loans come in subsidized and unsubsidized forms, with subsidized loans not accruing interest while enrolled in school, at least half-time, while unsubsidized loans accrue interest from the time they’re disbursed, regardless of enrollment status.

According to Federal Student Aid, Federal Work-Study provides part-time employment for students with financial need, helping them earn money to pay for education expenses while gaining work experience, often related to their field of study. It’s included as part of a financial aid package if the school determines the student has financial need and the program is available at that specific institution, since not every school participates in Work-Study to the same extent.

A fee waiver is when a provider reduces the explicit transaction fee on a transfer to zero, typically as part of a promotional offer or because a transfer meets certain qualifying conditions. A fee waiver applies specifically to the transaction fee, not necessarily to every cost component of a transfer. It’s a distinct concept from a permanently no-fee delivery method or funding option, which some providers offer as a standing feature rather than a time-limited promotion; a waiver specifically implies a reduction from what would otherwise be charged.

Fiat currency is government-issued money, such as the U.S. dollar, the euro, or the Mexican peso, that has value because a government has declared it legal tender, rather than being backed by a physical commodity like gold. The Federal Reserve confirms that U.S. currency hasn’t been redeemable for gold since 1934 or silver since the 1960s. Nearly every international money transfer sent or received moves fiat currency from one country’s system into another’s.

FICA, the Federal Insurance Contributions Act, is the law requiring employees and employers to contribute to Social Security and Medicare, the programs providing retirement, disability, and health coverage benefits to eligible workers. This deduction appears on nearly every paycheck for employees working in the U.S., calculated as a set percentage of wages up to certain limits for the Social Security portion specifically.

A FICO score is a particular brand of credit score, one among several scoring models used across the industry, according to the CFPB. Like other credit scores, it’s calculated from the information in a credit report, typically ranging from 300 to 850, with a higher score generally reflecting a stronger credit profile.

Financial aid refers to grants, loans, and work-study funding intended to help cover the cost of education, including tuition, fees, and living expenses while enrolled. It can come from federal, state, school-specific, or private sources, each with its own eligibility rules and application process.

According to the CFPB⁠(opens in new window), financial capability is the internal capacity to act in one’s own best financial interest, given socioeconomic and environmental conditions. It goes beyond simple financial literacy, understanding concepts like interest rates or budgeting, to include whether someone actually has the practical ability and confidence to use that knowledge effectively when a real decision arises.

A financial emergency is an unexpected event that creates an urgent, significant financial need, commonly including a sudden job loss, a major medical bill, an urgent home or vehicle repair, or a similarly disruptive, unplanned cost. What distinguishes a true financial emergency from a routine but unwelcome expense is both its unpredictability and its potential to seriously disrupt the ability to meet other financial obligations if unprepared for it.

Financial goals are specific, defined targets for money, such as saving a particular amount by a particular date, paying off a specific debt, or building toward a major purchase, that give everyday financial decisions a clear direction and a way to measure progress. According to the CFPB⁠(opens in new window), setting a specific goal, putting a plan into action for a trial period, then comparing real results against the plan and making adjustments, are the core steps behind turning a vague intention into an actual, working goal.

Financial information is any data related to income, bank accounts, transactions, credit history, or overall financial situation, including things like account numbers, transaction history, credit score, and income details. This category is broad by design, since it needs to cover the many different types of personal financial data that institutions collect, use, and are obligated to protect under various privacy frameworks.

A financial institution is a broad term for any organization that provides financial services, including accepting deposits, lending money, processing payments, or facilitating money transfers. Banks, credit unions, and money transfer operators are all examples of financial institutions, though they differ in what services they’re licensed to provide.

A financial statement is a formal document that summarizes a business’s or individual’s financial activity and position. The term covers three core types: the balance sheet⁠(opens in new window), which shows what’s owned and owed at a point in time; the income statement⁠(opens in new window), which shows revenue and expenses over a period; and the cash flow statement, which tracks the actual movement of cash.

A financial transaction is any exchange of money, goods, services, or other value between two or more parties, ranging from a simple cash purchase to a complex multi-step business deal. Paying for groceries, receiving a paycheck, or sending money internationally are all financial transactions, and each one, in principle, creates a record documenting that the exchange took place.

According to the CFPB⁠(opens in new window), financial well-being is a state in which a person can fully meet current and ongoing financial obligations, feel secure in their financial future, and make choices that allow them to enjoy life. This definition deliberately goes beyond income or net worth alone, capturing a more holistic, subjective sense of financial security and freedom that two people with similar incomes can experience quite differently.

A fiscal year is a consecutive 12-month period used for financial reporting and accounting purposes, which may or may not align with the January-to-December calendar year. Businesses choose their fiscal year based on what makes sense for their operations, sometimes aligning it with a natural business cycle rather than the calendar.

Fixed assets are assets a business owns and uses in its operations over a long period, generally more than a year, rather than assets intended for quick resale or conversion to cash. Common examples include equipment, machinery, vehicles, and property. Fixed assets typically depreciate over time, meaning their recorded value decreases predictably as they age or wear.

According to the CFPB⁠(opens in new window), fixed expenses generally cost the same amount and occur regularly each month, though some, like a utility bill, can also behave somewhat like a variable expense since the amount changes depending on usage even while the bill itself recurs on a fixed schedule. Common examples include rent or mortgage payments, most loan payments, insurance premiums, and many subscription services, all of which typically bill a predictable amount on a predictable schedule regardless of behavior changes elsewhere in the budget.

A fixed interest rate remains constant for the entire term of a loan, meaning the interest cost, and often the payment amount, doesn’t change regardless of what happens in the broader market. This is the opposite of a floating interest rate, which can rise or fall based on a benchmark rate over time.

A floating interest rate, also called a variable or adjustable rate, is a rate that can change periodically over the life of a loan, based on movement in an underlying benchmark. This differs from a fixed interest rate, which stays constant regardless of what happens in the broader market.

Foreclosure is the legal process through which a mortgage lender or servicer takes possession of a home after the borrower has failed to make payments according to the loan agreement. The legal foreclosure process generally can’t begin until a borrower is at least 120 days behind on mortgage payments, giving homeowners a real window to seek help before reaching that point.

A foreclosure relief scam targets homeowners at risk of losing their property, offering fake assistance, often for an upfront fee or in exchange for signing over the deed to the home, that ultimately leaves the homeowner worse off than before.

A foreign transaction fee is a charge some card issuers apply when a transaction is processed in a foreign currency or routed through a foreign bank, separate from any charge applied by a merchant or a money transfer provider.

According to the IRS⁠(opens in new window), Form W-4 tells an employer filing status, adjustments for multiple jobs, credits, other income, and deductions, information used to calculate the correct amount of federal income tax to withhold from pay each pay period. Getting this right matters because it directly affects both paycheck size throughout the year and whether additional tax is owed or a refund received when filing an annual return.

Financial fraud involves deception for financial gain, and a scam is a common form of it, where victims are tricked into handing over money or personal information based on a false story. Fraud and scams range enormously in their specific details, a fake romantic interest, a too-good-to-be-true investment, an urgent request from someone pretending to be family, but nearly all of them share a recognizable underlying structure once the pattern is known.

Foreign exchange refers to the process, and the broader global market, of converting one currency into another. Every international money transfer involves a foreign exchange step, since the currency being sent needs to be converted into the currency a recipient will actually receive.

The gig economy refers to work arranged through short-term contracts, freelance assignments, or app-based platforms, rather than traditional, ongoing employment with a single employer. This includes driving for a rideshare app, delivering food or packages, freelance writing or design work, and many other flexible, often self-directed forms of work.

A given period is the specific timeframe that a financial figure, statement, or calculation covers, such as a week, a month, a quarter, or a year. Nearly every meaningful financial number, income, spending, savings growth, only makes sense in reference to a specific given period, since the same raw figure can represent something completely different depending on whether it covers a day, a month, or a full year.

A government benefits card is a type of prepaid card used to distribute public benefits, such as food assistance, unemployment insurance, or other government support, directly to a recipient. Recipients of certain government benefits may have a choice between a government-arranged prepaid card or having benefits deposited into their own bank account or prepaid card, depending on the specific program.

A grace period is a set window of time, following a billing cycle or payment due date, during which a balance can be paid in full without interest applying, or in some loan contexts, without a payment being considered late. Credit card issuers aren’t legally required to offer one, though most do on regular purchases.

A grant is money awarded, typically based on demonstrated financial need or a specific purpose, that the recipient doesn’t need to repay, unlike a loan. For education specifically, the Federal Pell Grant is the largest federal need-based grant program, awarded to undergraduate students who demonstrate significant financial need, based on their Student Aid Index and their school’s cost of attendance.

Gross income is total earnings before taxes, insurance premiums, retirement contributions, or any other deductions are subtracted. It’s typically the figure quoted in a job offer, salary listing, or employment contract, since it represents the full value of compensation before any of the specific deductions that will ultimately reduce what actually reaches a bank account.

Gross profit is calculated by subtracting the cost of goods sold, meaning the direct costs of producing what was sold, such as materials and direct labor, from total revenue. It doesn’t account for overhead costs like rent, marketing, or administrative salaries, which are subtracted later to arrive at net profit.

A guarantor is a person who agrees to take on the responsibility of repaying a debt or fulfilling an obligation, such as a lease, if the primary borrower or tenant fails to do so. This role carries genuine financial risk, since the guarantor doesn’t receive the loan or the apartment, but becomes fully responsible for the obligation if the primary party defaults. The arrangement exists specifically to give a lender or landlord extra assurance when the primary applicant’s own financial track record isn’t enough on its own, which is exactly why the role tends to come up so often for people newer to a country’s financial system.

According to the IRS, a health savings account, or HSA, is a tax-advantaged account that lets eligible individuals save money to pay for qualified medical expenses. To contribute, enrollment in a high-deductible health plan is generally required, with no other disqualifying health coverage, among other specific requirements set out in IRS guidance.

Home delivery is a money transfer delivery method in which cash is physically brought to the recipient’s address by a courier, rather than requiring the recipient to visit a bank or an agent location. It’s one of several delivery options alongside bank deposit, cash pickup, and mobile wallet delivery, and its availability depends on the specific destination country and corridor. Unlike the other delivery methods, home delivery requires a physical address rather than an account number, a mobile wallet number, or a pickup location, which makes getting that address exactly right an especially important part of setting up the transfer correctly.

Homeowner’s insurance is a policy that protects property and belongings against damage, theft, and certain liability claims, in exchange for a regular premium payment. The NAIC’s overview of homeowners coverage confirms that a standard policy generally covers the dwelling, other structures, personal property, and personal liability. If a mortgage is in place, a lender will almost always require homeowner’s insurance for as long as the loan is outstanding.

Identity theft happens when someone uses personal information, a name, Social Security number, or account details, without permission to open accounts, make purchases, or access money that belongs to someone else. According to IdentityTheft.gov⁠(opens in new window), recovering from identity theft is a process, but having a clear, step-by-step plan makes the difference between a manageable situation and a prolonged, stressful one.

According to the FTC⁠(opens in new window), imposter scams come in many varieties but all work the same basic way: a scammer pretends to be someone trusted to convince the target to send them money. Imposter scams were the most reported type of fraud in the United States in recent years, more common than any other single category, precisely because the underlying tactic works across so many different disguises.

Impulse buying is making an unplanned purchase spontaneously, without prior consideration, research, or an existing need, typically driven by an immediate emotional reaction or a compelling in-the-moment opportunity rather than a deliberate decision. It’s distinct from a planned purchase, even a discretionary one, since the defining feature of an impulse buy is the absence of any prior intention to make that specific purchase before the moment it happened.

An inactivity fee is a charge some prepaid card or account providers apply after a set period, often measured in months, during which no transactions occur on the account.

An income statement, also called a profit and loss statement or P&L, is a financial statement summarizing a business’s revenue, expenses, and resulting profit or loss over a specific period, such as a month, quarter, or year. It follows a straightforward structure: revenue, minus expenses, equals net profit or loss.

Income tax is a tax assessed on money earned, whether from wages, self-employment, investments, or other sources, collected by the federal government and, in most states, by the state government as well. The specific rate generally increases as income rises, under what’s called a progressive bracket system, meaning different portions of income are taxed at different rates rather than the entire income being taxed at a single flat rate.

An Individual Taxpayer Identification Number, or ITIN, is a 9-digit number the IRS issues for people who need a U.S. taxpayer identification number for federal tax purposes but aren’t eligible for a Social Security number. It’s issued for federal tax purposes only: it doesn’t authorize work in the U.S. and doesn’t serve as identification outside the federal tax system.

Inflation is the rate at which the general level of prices for goods and services rises over time, meaning a fixed amount of money buys progressively less as inflation continues. According to the Bureau of Labor Statistics⁠(opens in new window), the Consumer Price Index is the primary tool used to measure this change in the United States, tracking the average change in prices paid by consumers for a broad basket of everyday goods and services.

An installment loan is a type of loan repaid through a series of fixed payments made on a predetermined schedule until the loan is fully paid off. Common examples include auto loans, personal loans, student loans, and mortgages, each repaid in regular installments that typically cover both principal and interest, according to the Consumer Financial Protection Bureau.

Insurance is a financial product that protects against unexpected, significant financial losses, in exchange for regular premium payments to an insurance company. If a covered event happens, such as an illness, an accident, or property damage, the insurer pays some or all of the resulting cost, according to the terms of the specific policy.

An intangible asset is a non-physical asset that has value for a business, such as a trademark, a patent, a brand reputation, software, or a customer relationship. Unlike a tangible asset like equipment or property, an intangible asset can’t be touched, but it can still be bought, sold, licensed, or protected legally, and it often contributes significantly to a business’s overall worth.

Interest is the amount charged for borrowing money, or the amount earned for saving or lending it, typically expressed as a percentage rate applied over a specific period. On a loan, interest is the primary cost of borrowing beyond the amount originally received. On a savings account, interest is what the bank pays for keeping money with them. The same underlying concept works in opposite directions depending on which side of the transaction someone is on: a borrower wants a lower rate, while a saver wants a higher one.

Interest capitalization occurs when accrued but unpaid interest on a loan is added to the principal balance, increasing the total amount owed. Because future interest is calculated as a percentage of the outstanding principal, that added amount then starts accruing interest too, a form of compounding that can meaningfully increase total debt over time.

An interest rate is the base cost of borrowing money, or the base return earned for saving it, expressed as a percentage. For credit cards specifically, this rate is typically stated as a yearly rate called the APR. For other loan types, the interest rate is distinct from, and generally lower than, the APR, which also folds in additional fees. The distinction matters most at the point of comparison shopping, since two loans with identical interest rates can still carry very different total costs once fees are added into each one’s APR.

The Internal Revenue Service, or IRS, is the federal agency responsible for collecting taxes and enforcing the U.S. Internal Revenue Code. It processes tax returns, issues refunds, provides guidance and forms for taxpayers, and, when necessary, pursues collection or enforcement action against those who don’t meet their tax obligations.

An International Bank Account Number, or IBAN, is a standardized code used to identify a specific bank account for international transfers. It combines a country code, two check digits, and a country-specific account identifier into a single string, typically between 15 and 34 characters depending on the country. IBANs are used across most of Europe and many other regions to make cross-border bank transfers more reliable.

Invoice financing is a form of short-term borrowing where a business receives an advance on the value of its unpaid invoices, rather than waiting for clients to pay on their normal schedule.

KYC, short for Know Your Customer, is a verification process that financial services use to confirm who someone is before letting them use a platform to send money. It’s a required part of how regulated financial institutions operate under anti-money laundering laws like the Bank Secrecy Act, which the Financial Crimes Enforcement Network⁠(opens in new window) administers specifically to help detect and prevent the financial system from being used for illegal purposes.

Principal is the original amount of money borrowed in a loan, or the original amount invested, before any interest is added. On a loan, payments are split between reducing the principal and covering the interest charged for borrowing that principal amount.

Mail fraud uses deceptive mail, sometimes physical letters and increasingly emails or texts styled to look like official mail, to trick recipients into sending money, sharing personal information, or clicking a malicious link. According to the U.S. Postal Inspection Service⁠(opens in new window), which investigates fraud and scams related to the mail, common categories include sweepstakes and lottery scams, fraudulent investment offers, and counterfeit check schemes.

Market value is the price at which an asset, such as property, a vehicle, or an investment, would reasonably sell for in the current market, based on what a willing buyer would pay a willing seller. It’s an estimate based on current conditions, not a fixed or guaranteed amount.

A maturity date is the date on which a financial instrument, such as a bond, a certificate of deposit, or certain loans, reaches the end of its term. At this point, the full amount owed or invested typically becomes due, or in the case of a savings product, becomes available for withdrawal without penalty.

A merchant cash advance, or MCA, is a financing arrangement in which a business receives an upfront lump sum in exchange for repaying it, plus a fee, through a percentage of future sales, often deducted automatically on a daily or weekly basis. It’s priced with a flat factor rate rather than an interest rate, which is part of why comparing its true cost to a traditional loan takes some extra math.

A microloan is a relatively small loan designed to provide funding to entrepreneurs and small business owners who might not qualify for a conventional bank loan. Through the SBA’s Microloan Program, amounts range from a few hundred dollars up to $50,000, with the average loan around $13,000. Microloans are frequently offered by nonprofit organizations, community development financial institutions, or other mission-driven lenders rather than traditional banks, and many programs exist entirely independently of the SBA.

A minimum payment is the smallest amount required on a credit account by the due date to avoid a late fee and keep the account in good standing. It’s typically calculated as a small percentage of the balance, or a flat minimum amount, whichever is greater. Paying only this amount avoids immediate penalties but doesn’t meaningfully reduce the underlying balance.

According to the U.S. Department of Labor⁠(opens in new window), minimum wage is the lowest hourly rate an employer can legally pay a covered, nonexempt employee, established under the Fair Labor Standards Act at the federal level, with many states and some cities setting their own additional minimum wage requirements on top of the federal floor.

Mobile banking is the ability to manage a bank account, including checking a balance, transferring money, and paying bills, through a dedicated app on a phone. It’s closely related to online banking, though mobile banking specifically refers to using a phone-based app rather than a web browser.

A mobile payment is a transaction made using a smartphone or other mobile device, whether that’s tapping to pay in a store, sending money through an app, or receiving funds directly to a phone-linked account. In many countries, mobile payments extend well beyond convenience, functioning as the primary way people access financial services at all.

A mobile wallet is a digital account linked to a mobile phone number. It lets users send, receive, and store money using their phone, without needing a traditional bank account. Recipients can access transferred funds directly in the app, pay merchants, settle utility bills, or withdraw cash at authorized agent locations. Unlike a bank account, a mobile wallet requires only a phone number and a valid ID to open, making it accessible in regions where formal banking infrastructure is limited.

A money market account, sometimes called a money market deposit account, is a type of bank account that typically pays a higher interest rate than a standard savings account, while often allowing limited check-writing or debit card access. It’s still a deposit account, not an investment product, and it’s generally covered by federal deposit insurance up to applicable limits at an insured bank or credit union.

A money order is a prepaid, paper-based payment instrument, purchased upfront for a specific amount and made payable to a specific recipient. Because it’s paid for at the time of purchase, a money order can’t bounce the way a personal check can, and it typically includes security features designed to prevent counterfeiting.

A money transfer is the process of sending money from one person or entity to another, often across international borders and involving a currency conversion. It can be sent through a bank, a dedicated money transfer provider, or another regulated financial service, and it's typically delivered to the recipient through a specific method such as a bank deposit, cash pickup, or mobile wallet. A bank transfer and a digital transfer are both closely related terms that describe overlapping parts of this same process, and understanding how they connect helps make the bigger picture clearer.

Money transfer fees are the charges applied when sending money, and they typically come in two layers: an explicit transaction fee charged directly for the transfer, and the exchange rate margin built into the currency conversion.

A mortgage is a loan used to purchase real estate, where the property itself serves as collateral for the loan. This makes it a secured loan, meaning if payments stop, the lender has the legal right to take possession of the property through a process called foreclosure. A mortgage typically has a much longer repayment term than other common loans, often 15 to 30 years, which is part of why even a small difference in rate compounds into a large difference in total cost over the life of the loan.

A mutual fund is an SEC-registered investment company that pools money from many investors and invests it in stocks, bonds, short-term money-market instruments, or some combination of these, managed by a registered investment adviser. Each mutual fund share represents part ownership of the fund’s overall portfolio, along with a proportional share of the gains and losses that portfolio generates.

Net income is actual take-home pay after taxes, insurance premiums, retirement contributions, and any other deductions have been subtracted from gross earnings. It’s the amount that actually lands in a bank account, and it’s typically meaningfully lower than the gross salary figure quoted in a job offer or listed at the top of a pay stub.

According to the Federal Reserve⁠(opens in new window), wealth, or net worth, is the difference between the value of assets owned by a household and the value of the liabilities, or debt, held by that household, a definition the Federal Reserve tracks nationally through its triennial Survey of Consumer Finances. It’s calculated by adding up the value of bank accounts, investments, property, and other valuable possessions, then subtracting any outstanding debt, including credit cards, loans, and mortgages, leaving a single figure representing an actual financial position at a given point in time.

Online banking is a service that lets an account be accessed and managed through a website or mobile app, rather than requiring a visit to a physical branch. Common features include checking a balance, transferring money between accounts, paying bills, and setting up direct deposit, all available at any time rather than only during branch hours.

An open-loop card is a card that carries a major payment network logo and can be used broadly, wherever that network is accepted, rather than being limited to a single merchant. According to the CFPB’s prepaid card definitions, most prepaid cards, including general-purpose reloadable cards, payroll cards, and many government benefit cards, are open-loop.

Opportunity cost is the value of the next-best alternative given up when one particular option is chosen over another. Every decision involving limited resources, money, time, or effort, carries an opportunity cost, since using those resources one way inherently means they can’t simultaneously be used for something else also valued.

Ordinary income is money earned through regular activities like wages, salaries, tips, and most self-employment or freelance earnings, taxed at the standard income tax rate. The IRS explains that this is different from a capital gain, the profit from selling an asset for more than it cost, which often receives a lower tax rate, particularly if the asset was held for more than a year before selling.

An out-of-pocket cost is an expense paid directly, from personal funds, without insurance or another party reimbursing that specific amount. While the term is most commonly used in the context of health care, referring to costs like a deductible, copay, or coinsurance, it applies more broadly to any situation where a cost is personally covered that isn’t otherwise paid by insurance, an employer, or another responsible party.

An overdraft occurs when a transaction, such as a debit card purchase, an automatic bill payment, or a scheduled transfer, takes a bank account balance below zero. Depending on a bank’s policies, the transaction may still go through, with the account showing a negative balance, or it may be declined instead. Many banks charge a fee when they cover a transaction that results in an overdraft.

A paper check is a written instrument instructing a bank to pay a specific amount from the account holder’s account to a named recipient. Unlike a money order⁠(opens in new window), which is prepaid, a check can bounce if the account it’s drawn on lacks sufficient funds, which is one of the key differences worth understanding when deciding between the two.

A pay period is the recurring span of time that a single paycheck covers, such as a week, two weeks, twice a month, or a full month, depending on a specific employer’s payroll schedule. According to the U.S. Department of Labor⁠(opens in new window), the federal Fair Labor Standards Act doesn’t specify a required pay frequency, but most states require nonexempt employees to be paid at least twice a month, and any predictable, reliable schedule that meets state minimums is generally permitted. Understanding an exact pay period, not just how much is paid but how often, is foundational to building a budget that actually matches the rhythm of when money arrives.

A payroll card is a type of prepaid card an employer arranges to pay wages, typically used by workers who don’t have their own bank account for direct deposit.

Payroll tax refers to the taxes withheld from wages specifically to fund Social Security and Medicare, collectively known as FICA taxes when applied to employee wages. It’s calculated as a set percentage of wages up to certain limits for the Social Security portion, rather than following the progressive bracket system used for income tax.

A personal guarantee is an agreement in which a business owner personally commits to repaying a business debt if the business itself is unable to. This is common for small business loans, lines of credit, and some business credit cards, particularly for newer businesses without an extensive credit history of their own. The concept is closely related to being a guarantor more generally, though a personal guarantee specifically refers to this arrangement in a business lending context, rather than a personal loan or lease.

A PIN, or Personal Identification Number, is a numeric code that verifies the authorized user of a card when withdrawing cash or making certain purchases. It functions as a security check, confirming that whoever is using the card also knows this private code, which a thief who’s only obtained the physical card wouldn’t necessarily know.

According to the FTC⁠(opens in new window), scammers use email or text messages to trick people into giving up personal and financial information, hoping to gain access to an email, bank, or other account, or to sell that information to other scammers. Phishing attacks are launched by the thousands every day, and they’re often successful specifically because they closely mimic a company or service the recipient already knows and trusts.

A Ponzi scheme is an investment scam that pays returns to existing investors using money contributed by new investors, rather than from any legitimate underlying business activity or profit. According to Investor.gov⁠(opens in new window), organizers typically solicit new investors by promising high returns with little or no risk, and the appearance of profitability comes entirely from this continuous flow of new money, not from any real investment success.

A prepaid debit card is a card loaded with a set amount of money that can be spent, withdrawn, or used for transactions, without being linked to a traditional bank account. Unlike a standard debit card, which draws from an existing account balance, a prepaid card’s available funds are whatever has been loaded onto it directly.

Prepayment refers to paying off some or all of a loan’s remaining balance before its originally scheduled end date. This can mean a full early payoff or simply making extra payments toward the principal ahead of the regular schedule, both of which reduce the total interest that would otherwise accrue over the remaining term. The concept applies to almost any installment-style loan, from a personal loan to a mortgage to a buy-now-pay-later purchase, though the specific rules for making it work, and any penalty for doing it, vary by loan type.

A prepayment penalty is a fee charged by some lenders when a borrower pays off a loan, in full or significantly ahead of schedule, before its originally agreed term. This fee exists because prepayment reduces the interest income the lender expected to earn over the full life of the loan, and the penalty compensates for some of that lost expected income.

Processing time refers to the period during which a money transfer moves through the necessary payment and verification steps before it’s ready for delivery to the recipient. This is distinct from delivery time, which covers the final step of actually getting the funds to the recipient, whether through a bank deposit, cash pickup, or another method. Most content conflates the two, but they represent different stages of the same overall journey.

A profit and loss statement, commonly abbreviated as P&L, is the same type of document as an income statement: it shows a business’s revenue and expenses over a specific period, ending in a net profit or loss figure. The terms are used interchangeably, with “P&L” being the more casual, commonly used shorthand.

Profit margin is the percentage of revenue that remains as profit after subtracting the relevant costs, calculated by dividing profit by total revenue and expressing the result as a percentage. A business or side hustle with high revenue but a thin profit margin may actually be earning far less real income than the impressive top-line revenue number initially suggests.

Proof of address is a document that verifies where someone currently lives, typically required by banks, financial institutions, and some government agencies as part of identity verification. Common accepted documents include a recent utility bill, a lease agreement, a bank or credit card statement, or official government correspondence, all showing a name and current address.

Proof of address is a document that verifies where someone currently lives, typically required when opening a bank account, signing a lease, registering for certain services, or completing identity verification with a financial institution. It’s usually satisfied with a recent utility bill, a lease agreement, or a bank statement showing a name and current address.

Property tax is a recurring tax based on the assessed value of real estate owned, collected at the local level, typically by a county, city, or school district, rather than by the federal government. It’s generally used to fund local services like schools, infrastructure, and emergency services, and it continues for as long as the property is owned, unlike a one-time transaction-based tax.

The purchase price is the specific amount a buyer and seller agree upon for a transaction, such as buying a home, a vehicle, or another asset. It’s the actual, agreed-upon transaction amount, which may be higher, lower, or the same as an asset’s broader market value.

Rate of return measures how much has been gained or lost on an investment relative to what was originally put in, expressed as a percentage. It’s a general term applicable to virtually any investment or financial decision, allowing comparison of very different kinds of investments, a stock, a bond, a piece of property, on a common, standardized basis.

A rebate is a partial refund offered on a purchase, typically requiring the buyer to take a specific action, such as submitting a receipt, a form, or an online claim, rather than being applied automatically at the time of purchase. This distinguishes a rebate from a straightforward discount, which simply reduces the price paid immediately, without any additional steps required afterward to receive the benefit.

A recipient is the person or entity who receives the money sent in a transfer. Depending on the delivery method, a recipient might receive funds directly into a bank account, collect cash at an agent location, or receive a credit to a mobile wallet. While formal documents sometimes use the term “beneficiary,” “recipient” is the clearer, everyday term for the person actually receiving the money. A single transfer typically has one recipient, though a sender may have multiple recipients saved for different transfers, such as separate family members receiving support in different corridors.

Bank reconciliation is the process of comparing a business’s own financial records, such as a bookkeeping system or accounting software, against a bank statement to confirm they match, and to identify and resolve any discrepancies. It’s a routine but important check that catches errors, whether from a bank mistake, a missed entry in internal records, or fraud.

A refund is money returned, typically because a purchased item was returned, a service was canceled, or because an error occurred in the original transaction. Unlike a rebate, which usually requires an active claim submitted after a purchase for a promotional benefit, a refund is generally tied directly to reversing or correcting a specific transaction that didn’t go as expected.

A remittance is money sent by an individual living or working abroad to family, friends, or a household in their home country, typically on a personal rather than commercial basis. While closely related to the broader term “money transfer⁠(opens in new window),” remittance specifically implies this personal, often recurring, purpose, whether that’s supporting a family’s living expenses, covering a specific need, or contributing to savings back home. The history of remittances⁠(opens in new window) stretches back long before digital transfers existed, from telegraph wires to today’s apps, though the underlying purpose has stayed essentially the same.

Retained earnings represent the cumulative profit a business has kept over its lifetime, after accounting for any distributions or dividends paid to owners. They accumulate on the balance sheet, growing when the business is profitable and distributions are lower than profit, and shrinking if the business takes a loss or distributes more than it earned in a given period.

Retirement planning is the ongoing process of preparing financially for a period, typically later in life, when regular income from active work is no longer being earned. It generally involves estimating how much money will be needed, choosing appropriate savings and investment vehicles, and consistently contributing over time to build toward that future need.

Revolving credit is a type of borrowing arrangement that provides access to a set limit, and as what’s borrowed gets repaid, that amount becomes available to borrow again, without needing to apply for a new loan. A credit card is the most familiar example, though a line of credit works similarly.

A routing number is a nine-digit code that identifies a specific bank or credit union within the United States. Also called an ABA number, the same underlying identifier, it works alongside an account number to direct deposits, direct debits, and transfers to the correct financial institution before the money reaches a specific account.

Sales tax is a consumption tax added to the price of many goods and services at the point of sale, collected by the seller at the time of purchase and then remitted to the relevant state or local government. Unlike income tax⁠(opens in new window), which is based on what someone earns, sales tax is based on what’s spent, making it a tax encountered directly nearly every time a purchase is made.

A savings account is a type of bank account designed to hold money being set aside rather than spent right away. It typically earns interest on the balance, though usually at a modest rate, and often limits the number of withdrawals allowed each month compared with a checking account.

Scholarships are awards of money for education that don’t need to be repaid, typically granted based on merit, financial need, background, field of study, or other specific criteria set by the awarding organization. Unlike federal grants and loans, scholarships are offered by a wide range of sources, schools, private organizations, community groups, and businesses, each with their own eligibility rules, which is exactly why the scholarship landscape can feel so much more fragmented and harder to navigate than federal aid.

A secured credit card is a type of credit card that requires an upfront cash deposit, which typically becomes the credit limit and serves as collateral for the card issuer. This structure makes it more accessible than an unsecured card, since the deposit reduces the issuer’s risk, allowing them to extend credit to someone with limited or no existing credit history.

A secured loan is a loan backed by a specific asset, called collateral, which the lender has the legal right to claim if the borrower fails to repay according to the agreed terms. A mortgage, secured by the home itself, and an auto loan, secured by the vehicle, are both common examples. A secured credit card and a secured personal loan, often backed by a cash deposit rather than property, follow the same basic principle on a smaller scale.

A share is a unit of ownership in a company. Owning a share generally entitles the holder to a proportional claim on the company’s profits and, in many cases, a vote on certain company decisions. Companies can issue shares to raise capital, with investors purchasing shares in exchange for providing that capital, becoming part-owners of the business as a result.

Short-term financial goals are specific financial targets that can realistically be achieved within a relatively near timeframe, generally within about a year. Common examples include building a starter emergency fund, paying off a specific smaller debt, saving for a particular near-term expense, or increasing a regular transfer amount to family by a specific, planned increment.

A short-term investment is designed to hold and modestly grow money over a period ranging from a few months to a few years, generally with lower risk and lower expected return than a longer-term investment like stocks. The core tradeoff is straightforward: short-term investments prioritize preserving principal and keeping funds relatively accessible over maximizing growth.

A side hustle is a way of earning additional income outside a primary job, typically on a flexible, part-time basis that fits around a main work schedule. Common examples include freelance work, driving or delivering for a gig platform, tutoring, selling handmade or resold goods, or offering a specific skill or service on a project basis.

SMART is a framework for setting effective goals, standing for Specific, Measurable, Achievable, Relevant, and Time-bound. Each of these five elements addresses a specific way that a vague goal tends to fail, and applying all five to a financial goal transforms a general aspiration into a concrete, actionable plan that can actually be tracked and achieved.

Social Security is a federal program providing retirement, disability, and survivor benefits, funded through payroll tax contributions collected from wages during working years. According to the SSA⁠(opens in new window), credits toward eligibility are earned based on annual earnings, generally needing 40 credits, roughly 10 years of qualifying work, to become eligible for retirement benefits, though different, often lower, credit requirements apply for disability and survivor benefits.

A Social Security number is a unique nine-digit identifier issued by the Social Security Administration, originally created to track earnings for Social Security benefits but now widely used for employment, tax reporting, opening bank accounts, and applying for credit. According to the SSA⁠(opens in new window), generally only noncitizens authorized to work in the United States by the Department of Homeland Security can obtain an SSN.

A sort code is a six-digit number used in the U.K. to identify a specific bank and branch. It’s typically written as three pairs of digits separated by hyphens, such as 12-34-56, and works together with an eight-digit account number to direct a payment to the correct account.

According to the FCC⁠(opens in new window), spoofing is when a caller deliberately falsifies the information transmitted to a caller ID display to disguise their true identity. Scammers often use this to make an incoming call appear to come from a local number, a trusted business, or even a government agency already familiar to the target, specifically to increase the odds the call will be answered and believed.

A spread, sometimes called a markup, is the margin a provider builds into the exchange rate offered for a transfer. Instead of, or in addition to, charging an explicit transaction fee, a provider can build its margin directly into the rate applied to a currency conversion, which affects how much of the destination currency a recipient actually receives.

State income tax is a tax collected by most U.S. states on income earned by residents, and in some cases nonresidents who earn income within that state, layered on top of the separate federal income tax collected by the IRS. Not every state has one; a handful have no state income tax at all, while the states that do impose it vary considerably in their specific rates and bracket structures.

A statement of cash flow is a financial statement that tracks the actual movement of cash into and out of a business over a specific period, organized into three categories: operating activities, investing activities, and financing activities. Unlike the income statement, which can include revenue not yet collected or expenses not yet paid, the cash flow statement reflects only real, completed cash transactions.

Stocks are a type of security that gives stockholders a share of ownership in a company, and they’re also called equities. Owning a stock means owning a proportional claim on that company’s assets and, in most cases, a proportional vote in certain corporate decisions such as electing the board of directors.

The stock market is a collective term for the exchanges and marketplaces where shares of publicly listed companies are bought and sold between investors. Rather than a single physical place, it’s an interconnected system of exchanges, such as the New York Stock Exchange and the Nasdaq, along with the electronic infrastructure that matches buyers and sellers and records transactions.

The Student Aid Index, or SAI, is a number calculated using the financial and household information provided on the FAFSA, used by schools to determine eligibility for need-based financial aid. It replaced the older Expected Family Contribution terminology as part of a broader FAFSA redesign, though the underlying purpose, estimating a family’s financial capacity relative to college costs, remains similar.

A student loan servicer is a company responsible for managing the day-to-day administration of a student loan, including collecting payments, responding to customer service inquiries, and processing changes to a repayment plan. For federal student loans specifically, the servicer acts on behalf of the U.S. Department of Education, though it’s the servicer, not the Department directly, that’s typically the point of contact regarding the loan, which can be confusing since the servicer’s name is often what appears on a monthly statement rather than any reference to the federal government.

In investing, “subscribed” means committing to buy a specific number of shares or units in an investment offering, typically before those shares are actually issued or begin trading publicly. This term most commonly comes up in the context of an initial public offering, a new mutual fund launch, or certain bond issuances.

A tax deduction reduces taxable income, the amount tax is actually calculated on, which in turn reduces overall tax liability, though not dollar for dollar the way a tax credit does. A specific deduction reducing taxable income by a certain amount means actual tax savings depends on marginal tax rate, not the full deduction amount itself.

A tax lien certificate represents a legal claim against a property for unpaid property tax⁠(opens in new window), sold by the local government to a third-party investor in exchange for immediate payment of the delinquent tax owed. The property owner’s debt doesn’t disappear; it transfers to the certificate holder, who now has the legal right to collect the debt plus interest, and in some jurisdictions, to eventually initiate foreclosure if the debt remains unpaid.

A tax refund is money returned when the amount withheld from paychecks throughout the year, or otherwise paid toward a tax obligation, exceeds what was actually owed once a return is calculated. It’s not a bonus or free money from the government; it’s simply personal money being returned after too much was withheld.

Tax-related identity theft happens when someone uses personal information, typically a Social Security number or ITIN, to file a fraudulent tax return and claim a refund that doesn’t belong to them. According to the IRS⁠(opens in new window), this is a specific category of identity theft with its own dedicated resources and reporting process, since it intersects with the tax filing system in ways that general identity theft guidance doesn’t fully address.

Taxes fund government services at the federal, state, and local level, and different levels of government collect different types of tax for different purposes. Income tax funds general government operations based on what’s earned. Payroll tax specifically funds Social Security and Medicare. Sales tax is collected on purchases. Property tax funds local services based on real estate ownership. Understanding which specific taxes apply to a given situation, rather than treating “taxes” as one single thing, makes the whole system considerably easier to navigate.

A term loan is a loan structure that provides a fixed lump sum upfront, which the borrower repays over an agreed period through regular, typically fixed, payments. This structure is common for both personal financing needs and small business funding, offering a straightforward, predictable repayment schedule from the start. It’s often the first type of formal borrowing many people encounter, whether that’s a personal loan to cover an unexpected expense or a business loan to fund equipment or initial inventory.

According to IRS Publication 531⁠(opens in new window), all tips received are income and are subject to federal income tax, including cash tips received directly from customers, tips paid by an employer from a charge, and a share of any tips received through a tip-pooling or tip-splitting arrangement. The value of noncash tips, like event tickets or other items of value, is also considered income and subject to tax.

Total cost is the real, combined cost of sending an international transfer, made up of any explicit transaction fee⁠(opens in new window) plus the exchange rate⁠(opens in new window) applied during currency conversion. Because currency conversion is built into most international transfers, the amount that leaves a sender’s account is rarely identical to the amount a recipient actually receives, once converted to their local currency. Neither number alone tells the full story: the fee is usually the more visible piece, shown clearly at the point of sending, while the exchange rate margin is baked into the conversion itself and takes a bit more effort to see clearly.

A transaction fee is an explicit charge applied by a provider each time a money transfer is sent. Unlike the exchange rate margin, which is built into the converted amount rather than broken out on its own, a transaction fee is generally shown as its own line item before a transfer is confirmed, consistent with federal disclosure requirements described further below.

Transfer limits are the maximum amounts a money transfer provider allows a customer to send, whether per transaction, per day, or over a longer window like 30 or 180 days. They’re set for regulatory and fraud-prevention reasons, and they typically depend on factors like account verification level, delivery method, and destination country, rather than being a single fixed number that applies to everyone.

A transfer status is a label that shows where a money transfer currently stands in the process. “Pending” means the transfer is still being processed and hasn’t yet reached the recipient. “Completed” means the funds have been delivered according to the chosen delivery method. “Canceled” means the transfer was stopped before completion, whether by the sender, the provider, or due to an issue with the transfer details. Some providers use additional labels too, such as a status indicating that further verification is needed, but pending, completed, and canceled cover the three broad stages nearly every transfer moves through in some form.

Transfer time, or delivery time, is the period from when a money transfer is sent to when the recipient can actually access the funds, whether that’s money appearing in their bank account, becoming available for cash pickup⁠(opens in new window), or landing in a mobile wallet. This is the figure shown as an estimated delivery time before a transfer is confirmed, and it’s distinct from processing time, which covers the earlier stage before a transfer is even ready for delivery. The two stages happen in sequence: a transfer is processed first, and only once that’s complete does the delivery clock, in the sense that matters to a recipient, actually start.

Treasury Inflation-Protected Securities, or TIPS, are U.S. government bonds whose principal value adjusts based on changes in the Consumer Price Index, specifically designed to protect an investor’s purchasing power from being eroded by inflation over time. According to TreasuryDirect⁠(opens in new window), the official platform for purchasing and managing U.S. government securities, this makes TIPS a distinct category from standard treasury bonds, which pay a fixed amount regardless of how inflation moves.

A U.S. savings bond is a government-backed savings instrument issued by the U.S. Department of the Treasury, offering a guaranteed return in exchange for lending money to the federal government for a set period. Unlike a marketable Treasury security, a savings bond is non-transferable and specifically designed for individual savers rather than active trading.

The FDIC’s household survey defines being unbanked as no one in the household having a checking or savings account at a bank or credit union, relying instead on cash and alternative financial services for everyday money management.

Being underbanked means having a bank account, but still relying on alternative financial services, such as check cashing, money orders, or a prepaid card, because the account doesn’t fully meet actual needs.

According to the IRS⁠(opens in new window), unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually performed, including taxable interest, dividends, capital gains, rents, royalties, pension and annuity income, and unemployment compensation.

This category is distinct from earned income, which specifically requires active work or service in exchange for the payment received.

An unsecured loan is a loan that doesn’t require you to pledge a specific asset, like a car or a savings account, as collateral. Because the lender has nothing to claim if you default, approval depends mainly on your credit history, income, and existing debt. Common examples include most personal loans, student loans, and credit cards, a distinction the Consumer Financial Protection Bureau uses to separate the two basic loan categories.

Valuation is the process of estimating the worth of a business, asset, or investment, typically to support a specific decision such as a sale, an investment, a loan application, or a tax filing. Unlike a stock’s market price, which is set continuously through public trading, valuing a private business or a unique asset requires a deliberate analytical process, since no continuously updated public price exists for reference.

In finance, value is what something is genuinely worth, which may differ from the price paid for it or the amount stated on paper. Value can be assessed in several ways, including current market conditions, future earning potential, or the practical usefulness of an asset to a specific person.

According to the CFPB⁠(opens in new window), a variable expense is one that changes in amount from month to month, in contrast to a fixed expense, which generally costs the same amount and occurs regularly. Common examples include groceries, which vary based on what and how much is bought, transportation costs that fluctuate with how much someone drives or travels, and discretionary spending like entertainment or dining out.

According to the U.S. Commodity Futures Trading Commission, virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but does not have legal tender status. Virtual currencies are sometimes exchanged for U.S. dollars or other currencies, but they aren’t backed or supported by any government or central bank, and their value is driven entirely by market supply and demand.

A void transaction cancels a payment before it has been fully processed or settled, effectively stopping it as though it never happened. This is different from a refund, which reverses a transaction after it has already completed and settled.

A wage is the amount paid for work, most commonly calculated hourly. Minimum wage is the legal floor an employer must pay, set by federal, state, or local law, while a living wage is an estimate of what someone actually needs to earn to cover basic living costs in a specific area, which is often considerably higher than the legal minimum.

A wire transfer is an electronic movement of money directly between banks or financial institutions, processed individually rather than in a batch with other transactions. This individual processing is what typically allows a wire transfer to move faster than a standard bank transfer⁠(opens in new window), though usually at a higher cost. The term itself dates back to the era of the telegraph, when instructions to move money were literally wired between institutions, and while the technology has changed entirely, the name and the individual, prioritized handling it implies have stuck.