A

American Banker’s Association (ABA) number

The American Banker's Association number (ABA number) is an identification number for financial institutions. Also called an ABA routing number or transit number, it consists of nine digits. Financial institutions use this and individual account numbers to move funds from one bank to another. You may need to enter this number at certain times (such as when you automatically charge from your bank account, request a direct deposit, or order checks). Often, the ABA number is the same as the number on the bottom left side of paper checks, but not always. You can search for a bank’s ABA number on the American Banker’s Association website.

Automated Clearing House (ACH) transfer

An Automated Clearing House (ACH transfer) is the term for moving money electronically from one account to another when the accounts are with different banks. The name comes from the Automated Clearing House (the system that enables these transfers). Each ACH transfer consists of a debit (the withdrawal of money) and a credit (the deposit of money). Typically, ACH transfers take one to three business days —

Account number

An account number is a series of numbers (sometimes letters) that allows a business or financial institution to identify accounts. You’ll see this term used in a variety of situations. For example, the identifying number for a checking or savings account is a bank account number, while the account number for a credit card refers to the numbers printed on the front of the card. You may need to know your account number to purchase, deposit, or pay. You often provide it if you contact customer service to get information about your account.

Accounts payable

Accounts payable is the bookkeeping term for all the debts and payments a business typically must pay within 30 days or less. It includes all costs for goods and services. Some examples of accounts payable are fees paid to contractors, money owed to suppliers, ongoing expenses for software subscriptions, and office supplies and equipment costs. Payroll for employees and loans does not fall under the accounts payable category.

Accounts receivable

Accounts receivable is the bookkeeping term for money owed to a business because of a transaction. Most often, items that fall under accounts receivable are payments for goods and services that customers haven’t paid. For example, a food wholesaler that delivers orders to restaurants and gives customers 30 days to pay would include each outstanding payment under its accounts receivable.

Accruals

Accruals represent transactions that have occurred but aren’t yet recorded in a business’s financial statements. You’ll most often see the term related to accrual-based accounting. With this method of record keeping, a company records expenses and revenue when they occur, even if they haven’t paid them yet. For example, a wholesaler that allows customers 30 days to pay for supply deliveries would add revenue from a sale to accruals when a customer makes a purchase. The amount owed would remain an accrual until the customer pays the invoice.

Accrual basis

An accrual basis is a type of accounting where a company records money owed and revenue earned as soon as a transaction occurs — regardless of whether the amount was paid or received. For example, say a graphic design company requires customers to pay within 60 days of the completion of a project. When the company completes a project, the accountant or bookkeeper records the revenue immediately. The payment would remain in the accruals section of the company’s financial statement until the customer pays.

Annual return

An annual return refers to how much money an investment made or lost during one year. If a return is positive, the investment grows. A negative return means that a loss occurred. In most cases, you calculate the annual return by subtracting the initial value of the investment from the value at the end of the year. Then, you divide that number by the initial value of the investment and multiply by 100. For example, the annual return on a $1,000 investment worth $1,020 at the end of the year would be 2%.

Annuity

An annuity is a financial contract that creates a steady stream of revenue the owner can use as income. Typically, the money arrives on a set schedule in a fixed amount. Some insurance companies sell annuities as financial instruments. With these products, you purchase an annuity for a set amount. The annuity then accumulates interest for a fixed period known as the term. At the end of the term, the annuity matures and begins to pay out the initial investment plus interest. People may also receive lottery winnings and insurance company payouts as annuities.

Amortization

Amortization is the term for spreading the cost of something over a set period. In relation to loans, an amortization maps out how your payments will gradually pay down the loan balance and settle interest accrued until you pay the loan in full. In accounting, amortization means writing off the cost of an initial asset over time rather than all at once.

APR (Annual Percentage Rate)

The Annual Percentage Rate or APR is a percentage rate that tells you how much you pay in interest on a debt like a loan, credit card, or mortgage over one year. Depending on the terms of the debt agreement, the APR may include not only the interest accrued during the year but any additional fees. The APR allows you to compare your options when shopping for a loan, credit card, or mortgage.

Appraisal

An appraisal is an estimate of the value of something created by a licensed professional. Often, you’ll hear the term associated with mortgage loans. In this case, the appraisal tells you approximately how much the home is worth. You can also have an appraisal done on land, commercial real estate, and personal possessions (like jewelry and antiques).

Articles of incorporation

Articles of incorporation are the term for legal documents that create a corporation. The document typically includes the corporation’s name and business address, how many shares of the company there are, and the names and addresses of the incorporators. Incorporators are the people who form the company. They can include immigrants or natural-born U.S. citizens. Some states require additional information as well. Once the articles of incorporation are complete, you typically must file them with your state's department of state.

Asset

An asset is anything a person or business owns that has value. Examples of personal assets include money held in bank accounts, real estate, investments, furniture, and other personal property. Business assets and other owned property like machinery, raw materials, inventory, and patents can also include these things.

Asset allocation

Asset allocation is the term for how you distribute money. For example, you may choose to keep 50% of your money in checking and savings accounts, invest 10% in a retirement account, purchase bonds with 20%, and use the remaining 20% to trade stocks. A financial advisor can help you develop an asset allocation strategy that will help you save for future expenses or grow wealth.

Asset value

Asset value is the term for how much what you own is worth. Both objective and subjective information go into asset value calculations, and you’ll often see the term related to stocks. Here, the term refers to the total value of a company’s assets per share. Generally, a company gets undervalued if the asset value per share is less than the price. A lower asset value than the share price usually means the company is overvalued.

Associate’s degree

An associate degree is a college degree typically earned after two years of full-time study. Community and junior colleges offer associate degree programs. You may need an associate degree to find employment depending on your field. You may also pursue a four-year bachelor’s degree.

ATM

An ATM (automatic teller machine) accommodates banking tasks without speaking to someone. With an ATM or debit card, you can withdraw money from a checking or savings account, make deposits, and check your balance. Some ATMs also sell stamps. To use an ATM or debit card, you must enter a four-digit personal identification number (PIN). Sometimes, you may pay transaction fees to use an ATM. Immigrants who don’t have social security numbers can open bank accounts that provide a debit or ATM card at many financial institutions.

ATM balance inquiry fee

An ATM balance inquiry fee is a small amount of money paid for checking the balance of your checking or savings account at an automated teller machine or ATM. Most banks will allow you to check your balance on ATMs that they own, free of charge. However, you may pay a fee if you use an ATM owned by a different bank or in a public place, like a gas station or grocery store. The amount gets automatically deducted from the account associated with your ATM or debit card.

Automatic credit or debit

An automatic credit or debit is a transaction set up beforehand. A credit is a deposit into your account, while a debit involves withdrawing money to issue a payment. Most automatic credits and debits occur regularly (like every Friday or on the 15th of the month). To set up automatic debits and credits, you usually provide your bank account number and your bank’s routing number.

B

Bachelor’s degree

A bachelor’s degree is a four-year degree awarded by colleges and universities. You can pursue a bachelor’s degree after obtaining a high school or general education diploma (GED). However, some earn two-year associate degrees before entering bachelor’s degree programs. After earning a bachelor’s degree, you can continue your education by entering a graduate program.

Balance sheet

A balance sheet is a type of business financial statement. It lists the business’ assets, liabilities, and owner’s equity at a particular time. Assets are the business's property, like cash in accounts, equipment, and property. A business owes liabilities for debts like commercial loans and credit cards.The owner’s equity tells how much the person or people who own the company have invested. If you have a C corporation, you’ll need to submit a balance sheet when you pay your taxes. You may also need to present balance sheets to apply for loans, get investors, or sell a business.

Balloon loan

A balloon loan is a type of installment loan. With this loan agreement, you typically make equal payments over the loan up to the second-to-the-last payment. The last payment that pays off the loan is significantly larger than your other payments.

Bank

A bank is a financial institution that provides services to businesses and individuals. In the U.S., banks must receive licenses or charters from their operating states. Most banks accept deposits in checking accounts, savings accounts, and other types of accounts. In addition, they provide loans like auto loans and mortgages.

Bank account

A bank account is an account opened with a credit union or bank. You can then deposit money into the account. The most common types of bank accounts are checking and savings accounts. Checking bank accounts are for paying for expenses, while the purpose of savings accounts is to put away money for the future or expenses. In the U.S., immigrants can open a bank account at many banks. Contact the bank to find out what identification you’ll need to open an account at a bank.

Bank transfer

A bank transfer is a transaction where money moves electronically from an account at one bank to an account at a different bank. Banks often transfer funds through a system called the Automated Clearing House. We know these types of bank transfers as ACH transactions. Bank transfers always include two parts: the debit of money out of the first account and the credit of money to the second account.

Bankruptcy

Bankruptcy provides a way for individuals and businesses to eliminate debts they cannot pay. It’s a legal process that you typically need an attorney to assist with. Depending on the type of bankruptcy, the creditors (people you owe money to) may write off the debt, or you may create a payment plan to repay all or a portion of what you owe. Although bankruptcy can provide a fresh start, it negatively impacts your credit rating, potentially making it difficult for you to get loans, open credit cards, and even rent apartments.

Benefit

In financial and business terms, a benefit is a profit or some type of advantage. For example, a life insurance death benefit is the amount an insurance company pays out when the person named on the account dies. An employee benefit is usually insurance (such as health or disability insurance). Benefits contribute to your total compensation as an employee.

Bill-payment service

A bill-payment service makes paying the money you owe easier. Most services are online, and many banks offer them as a part of their mobile banking services. With a bill payment service, you provide the names, addresses, and phone numbers of businesses you pay money to and your account numbers with those organizations. Then, you can schedule automatic bill payments or onetime issue payments through the service. The bill pay service will send a check or make an electronic payment, and the money will come out of your account.

Bimonthly (semi-monthly)

Bimonthly can have two different meanings. It can refer to something that occurs once every two months or two times in one month. Semimonthly always means something that happens two times per month. As a result, bimonthly can sometimes be a synonym for semimonthly, but it isn’t always. If someone says a payment is due bimonthly, or you will receive compensation bimonthly, double check whether they mean once every two months or twice per month (semimonthly).

Bloom’s Taxonomy

Bloom's Taxonomy is a concept in education that describes how students learn and use information. It consists of six stages: remembering the information, understanding the concepts and ideas, applying the information in new ways, analyzing the information to connect it with other ideas, evaluating the information or making judgments about it, and creating new work or data based on the information.

Bond

A bond is a type of debt that a company, a municipality, or the U.S. government takes on to raise money. Investors purchase bonds for a set amount of money and get a promise that the entity will pay them back with interest once the bond matures. How long it takes for a bond to reach maturity is its term. U.S. savings bonds are one example. These are generally low-risk investments because the U.S. government backs them. Other bonds may carry more risk. Normally, non-U.S. citizens can buy U.S. savings bonds as long as their home country’s laws permit it.

Bookkeeper

A bookkeeper is a person who records financial transactions for businesses. They input a business’s revenue and expenses using accounting software programs. Some also process payroll, manage bank accounts, handle purchasing, pay bills, and prepare and send out customer invoices. Bookkeepers differ from accountants, who analyze financial data, create various reports, and advise on subjects like budgeting and tax planning.

Bootstrapping

Bootstrapping is the term for starting a business without obtaining help, financing, or investments from other people. Many immigrant entrepreneurs choose to bootstrap their startups, using personal savings or personal debt like lines of credit, home equity loans, and credit cards to get the money needed to launch their endeavors. The most significant advantage of bootstrapping is keeping complete ownership in your company. However, bootstrap entrepreneurs could lose their savings or get into debt if their companies don’t succeed.

Borrow

In business and financial terminology, borrowing means getting money from someone while promising to repay them. Most of the time, individuals and businesses must pay interest on the amount they borrow. Interest is a percentage of the balance added to the total amount owed regularly — such as daily or monthly. Someone who borrows money is a borrower, while the institution, organization, or individual giving money is the lender.

Borrower

A borrower is a person or organization that enters into an agreement with another entity (a lender) that gives them access to money in exchange for a promise of repayment.In most cases, borrowers must pay back the amount borrowed, plus an additional percentage (interest). Anyone who takes out a loan, like a mortgage or a car loan, is a borrower.

Budget

A budget is a financial plan that maps out how you will spend the money you make. Both individuals and businesses can create budgets to ensure income gets used wisely. Often, budgets break expenses up into categories. A personal budget may include food, utilities, entertainment, transportation, rent, or a mortgage payment. Business budget categories often feature things like payroll, research, development, and marketing.

Business

A business is an organization that conducts activities to make a profit or satisfy a mission. Examples include retailers that sell items to people or other companies. Businesses that don’t seek to make more than they spend are nonprofit organizations.

Business credit report

A business credit report is like a scorecard for how a business has been using credit. It shows a list of credit accounts such as loans and credit cards, along with juicy details like how much was borrowed, the payment terms, credit limit, current balance, and payment history. Plus, it gives some insight into the business itself, such as the ownership, number of employees, and type of operation. Lenders use this report to decide if a business is a good candidate for a loan.

Business credit score

A business credit score is a number that indicates how creditworthy a business is, based on an evaluation by an independent organization like Dun & Bradstreet, Equifax Small Business, or Experian Commercial. The score falls between 0 and 100 and is determined by factors such as the total amount of debt owed compared to available credit and the frequency of on-time payments. Lenders rely on credit scores, business credit reports, and other data to make informed decisions on whether or not to grant loan requests.

Business income

Business income is the cash that a business earns from selling products or services to consumers, companies, or government entities. Rent collected from tenants also counts as business income. This figure serves as the foundation for calculating how much a business has to pay in taxes to federal, state, and local government agencies. Lenders and investors consider business income when evaluating whether to offer loans, lines of credit, or investments.

Business plan

A business plan outlines how an entrepreneur will launch, manage, operate, and market a new business. A detailed business plan can contribute to the success of a new business. Lenders and investors also examine business plans when deciding whether to lend money or invest in startups.

Buy

To buy something means to pay money to take ownership of it. For example, you buy a property when using cash or a mortgage to pay for a home. You buy food, clothing, and other necessities from a variety of stores when you do everyday shopping.

Buying plan

A buying plan helps you prepare for big purchases, such as a home, a vehicle, or a major appliance. It specifies the budget and includes a list of important details about the purchase. For example, a buying plan for a new refrigerator may have a budget of $1000 and include measurements, the color of the finish, and desired features like an ice maker or French doors. A buying plan may also list options and compare price and other key features.

Buying power

Buying power is the amount of money someone has to spend. For example, when discussing investments, buying power refers to how much money you can spend on securities like stocks and bonds. You may also see people mention buying power when talking about the economy. In this terminology, buying power relates to how much of a particular good or service you can buy for a specific amount of money at a given time. If prices increase, buying power decreases. When prices fall, buying power increases.

C

Capital

Capital is the term for assets a company has available to grow or continue to operate. It includes cash, money in business checking and savings accounts, machinery, equipment, and intellectual property like research and patents.

Capital gain

A capital gain is money you make when you sell an asset like an investment or a home for more than you paid. Capital gains may be subject to taxes. For example, if you sell your primary home in the U.S., you rarely pay capital gains tax on the first $250,000 if you file individually or $500,000 if you file jointly with a spouse. A tax accountant can help determine whether you need to pay taxes on capital gains.

Capital loss

A capital loss is money you lose when you sell an asset for less than you paid. For example, if you purchase $1000 in stock and then sell it for $100, you have a capital loss of $900. Sometimes, you can deduct capital losses from your federal or state income tax in the U.S. A tax accountant can help you determine if you qualify for a deduction based on a capital loss.

Card replacement fee

A card replacement fee is a small amount of money you pay to a bank or other financial institution when you need to replace a debit card, ATM card, or credit card. You may need to request a new card if you lose your current one or a card is damaged. Institutions may waive the card replacement fee if you have to get a new card because of fraud or theft.

Cash

Cash is physical currency, coins, and banknotes that you can use to pay for things. It's a quick and easy way to make purchases without needing a bank account or credit history. You can use cash to buy anything from a cup of coffee to a car or a house. It's also a popular way to tip service providers like waiters and taxi drivers.

Cash flow

Cash flow refers to how money moves through a business. It includes cash received from transactions like customer purchases, fee payments, and money spent for expenses like rent, utilities, and raw materials. If your business has positive cash flow, you bring in more money than you spend. A company with negative cash flow spends more than it takes in.

Cash flow projections

Cash flow projections estimate how the money will move through a business in the future. Often companies create cash flow projections for a quarter, six months, or a full year. Cash flow projections can help you identify when your business will have extra money to make significant purchases or hire more people. You can also use cash flow projections to determine if you need to take out loans or open a line of credit to get more money to operate your business.

Cash pickup

Cash pickup is a delivery option available when you make online money transfers via Remitly and other services. With cash pickup, the person you send the money to goes to a physical location to get cash rather than receiving a deposit in their bank account. You can typically choose from a list of cash pickup locations when you transfer money.

Certificate of deposit (CD)

A certificate of deposit (CD) is a type of savings account that offers a higher interest rate than traditional savings accounts. It's a low-risk investment option that pays a fixed interest rate for a predetermined length of time, which can range from a few months to several years. Once you deposit money into a CD, you agree not to withdraw it until the end of the term. In exchange for this agreement, the bank offers a higher interest rate than regular savings accounts. At the end of the term, you can either withdraw your money or roll it over into a new CD. CDs are often considered a safe and reliable way to save money, but they may not be the best choice if you need to access your funds quickly.

Check

A check is a monetary instrument someone can present to a bank to receive cash. The money the person or business receives from the checks gets deducted from the account you write the check. Historically, banks physically transported paper checks to one another for processing, but today, many financial institutions convert paper checks into electronic payments, making money available more quickly.

Checking account

A checking account is a type of bank account that is used to manage day-to-day financial transactions, such as paying bills, making purchases, and depositing paychecks. When you open a checking account, the bank gives you a debit card and a checkbook, which you can use to access your funds. You can deposit money into your checking account as often as you'd like, and you can withdraw cash or make purchases with your debit card whenever you need to. Most checking accounts have no limits on the number of transactions you can make each month, but some may charge fees if you exceed a certain number.

Claim

A claim is a request for payment that you make to your insurance company when something bad happens. For example, if your car is damaged in an accident, you would file a claim with your auto insurance company to cover the cost of repairs. When you file a claim, you'll typically need to provide documentation to support your request, such as photos of the damage, receipts, or medical bills. Your insurance company will review your claim and decide whether to approve it. If your claim is approved, the insurance company will pay you the amount specified in your policy, minus any deductibles or limits that apply. The goal of filing a claim is to help you recover from a loss or damage without having to pay for everything out of your own pocket.

Closed-loop prepaid card

A closed-loop prepaid card is designed for exclusive use at specified stores or for particular purposes. By loading funds onto the card, you can spend them at designated locations. Public transportation cards serve as a prime example; they allow you to access buses and trains as long as your account has a positive balance. When the funds run out, you'll need to reload the card to continue utilizing its benefits.

Coin

A coin is a small piece of metal used as currency. Typically, coins are round. In the U.S., there are six coins commonly produced by the U.S. mint: the penny (worth one cent), nickel (worth five cents), dime (worth 10 cents), quarter (worth 25 cents), half-dollar (worth 50 cents), and one dollar (worth 100 cents). Half-dollar and one dollar coins are produced as collectibles.

Coinsurance

Coinsurance refers to the portion of healthcare costs you handle after meeting your deductible. Your insurance company typically covers the rest. For example, if you have a health insurance plan with 20% coinsurance and receive a $100 medical bill, once your deductible is met, you would pay $20, while the insurance company would cover the remaining $80.

Collateral

Collateral is something you pledge to back a loan or line of credit. If you cannot repay the lender as promised, the institution can take possession of the collateral and sell it to get money back for the unpaid portion of the loan. Often, loans to buy assets like homes, cars, and equipment use the property or item itself as collateral. You can also sometimes pledge investments like certificates of deposit, 401(k) retirement plans, and life insurance with a cash value as collateral.

College savings plan

A college savings plan is a type of account that enables you to save money to cover the cost of higher education. The most common college savings plan is the 529. This type of account has one beneficiary: the person who can use the money to fund their education. Once the account is open, anyone can contribute to it on behalf of the beneficiary. The beneficiary doesn’t have to pay taxes when they withdraw funds, as long as they use the money for a qualified educational expense.

Commission

The commission is a fee paid to an agent for selling an item or providing a service. Often, businesses calculate commissions based on a percentage of sales. For example, a person might get a 20% commission from a sale. Some jobs usually paid via commission include financial advisors, insurance agents, real estate agents, retail sales associates, car salespeople, travel agents, and advertising sales associates.

Comparison shopping

Comparison shopping involves evaluating several options before making a purchase to ensure you get the best value. This process involves comparing not only the prices but also other factors such as quality, unique features, and overall performance. For instance, when shopping for a new laptop, you might consider its price, battery life, size, weight, processor speed, warranty, and the availability of customer support.

Compound interest

Compound interest occurs when you earn interest on both the initial principal and the interest accrued from previous periods. Typically, financial institutions credit interest monthly, taking into account your average daily balance. Once interest is credited, it becomes part of the principal balance, which influences the interest calculation for the following month. Because of compounding interest, your money generally grows at a faster rate.

Consumer

A consumer is a person who buys goods and pays for services for personal use. Most adults are consumers.

Consumer Price Index (CPI)

The Consumer Price Index (CPI) measures how prices paid by consumers living in cities change. The U.S. Bureau of Labor Statistics (BLS) establishes and tracks the CPI. Consumer price index reports include a general category for all goods, separate categories for food and energy, and another category for all items excluding food and energy. The BLS publishes CPI information for the entire country and different geographic areas.

Copayment (or copay)

A copayment, or copay, is a fixed fee associated with health insurance that you pay to a healthcare professional or pharmacy for a covered healthcare service. For instance, if your health plan has a $20 copay, you would pay $20 for each doctor's office visit and $20 for every prescription filled at the pharmacy. Health insurance plans often have varying copays for primary care doctors, specialists, emergency room visits, and pharmacies. In some cases, copays may be lower when you select a healthcare provider within your insurance company's network.

Cosigner

A cosigner is someone who serves as a backup on a loan. The person signs the loan agreement, stating they will share the responsibility for paying the debt. If you cannot pay your loan, the cosigner is legally responsible for making the payments. Adding a cosigner with a steady income and strong credit history may allow you to get a loan you otherwise wouldn’t qualify for based on a financial institution’s lending criteria.

Cost

Cost is how much you pay for something. Most often, people refer to cost in terms of personal transactions. How much an item costs includes its price, sales tax, and any fees. Business costs include how much money a company spends to make or provide its goods and services or to obtain assets like machinery and equipment.

Cost-effective

Cost-effective means getting the most value or benefit for the money spent. It's a way to evaluate if something is a good investment or if it's worth the cost. When something is cost-effective, it means that it provides the desired result at a reasonable cost or that the benefits outweigh the expenses. Cost-effective decisions are important in personal finance, business, and government spending because they help ensure that resources are used efficiently and effectively.

Cost of attendance (COA)

The cost of attendance (COA) refers to how much a student must pay to attend a college or university for a specific time. Most institutions calculate COA by year. To arrive at the figure, the college or university adds up the cost of tuition, fees, room and board, living expenses, books, supplies, transportation, loan fees, and other expenses like buying a computer. You can use the COA to compare schools as an international student.

Cost of living

The cost of living is the amount of money you need to maintain a certain standard of living in a particular place. This includes things like housing, food, healthcare, transportation, and other basic necessities. The cost of living can vary a lot depending on where you live, and it's an important factor in deciding where to work or live.

Coupon

A coupon is a voucher that gives you a discount on goods and services. Printed coupons are available in flyers, magazines, and newspapers. Typically, you present the printed coupon with your purchase and get a percentage or dollar amount deducted from the total price. Online coupons may include a code that you can enter, or a QR code or barcode that you can show to a sales associate.

Credit

The word "credit" holds two distinct meanings. In financial transactions, a credit refers to money added to an account. However, when discussing lending, credit represents the capacity to purchase something and pay for it later using a credit card or a loan. The term "credit" can also refer to an individual's likelihood of repaying a debt on time. Possessing good credit signals to lenders that there is minimal risk in lending you money, increasing your chances of securing loans and credit cards.

Credit card

A credit card is a plastic card that enables you to make purchases and pay for them later. Lenders assign a maximum spending limit, known as the credit limit, for each card. When you make a purchase, your credit card balance rises, and your available credit decreases. Every month, you're required to make a minimum payment, which consists of a percentage of the outstanding balance plus interest. As you repay the balance, the repaid amount is restored to your credit line, allowing you to borrow again.

Credit card statement

A credit card statement is a paper or electronic document you receive if you have a credit card with a balance. The statement shows your current balance, minimum payment due, and available credit. It also shows payments, transactions, interests changes, and fees.

Credit history

A credit limit is the maximum amount a financial institution allows you to borrow with a credit card or line of credit. Lenders base credit limits on your credit score and credit history. Generally, a stronger credit history leads to a higher credit limit. As you build your credit, you can request a credit limit increase from a financial institution.

Credit limit

Your credit limit is the total amount of money a financial institution lets you borrow with a credit card or line of credit. Lenders calculate credit limits based on credit score and credit history. Generally, the stronger your credit history is, the higher your credit limit. As you build your credit, you can request a credit limit increase from a financial institution.

Credit line

A credit line is money you can borrow from and pay back in small payments or all at once. Credit lines include lines of credit issued by financial institutions and credit cards you get through credit card companies. When you borrow from a credit line, the lender charges you interest if the balance is not paid in full, so the total amount you repay is more than what you originally borrowed. As you make payments, money becomes available in the credit line to borrow from again.

Credit score

A credit score is a number between 300 and 850 that represents how likely you are to repay debts as promised. High credit scores make it easier to get loans and open lines of credit and credit cards. The top 3 credit reporting agencies in the U.S.are Equifax, Experian, and TransUnion, each of which provides its own credit report. How much total debt you owe, your payment history, and your total available credit are some of the factors that determine your credit score.

Credit union

A credit union is a financial institution that offers deposit accounts, such as checking and savings accounts, and loans, including personal loans, credit cards, and lines of credit. Credit union members share ownership in the institution and vote on matters like appointing board members. Credit unions differ from banks regarding profit status; banks are for-profit and privately owned or publicly traded, while credit unions are member-owned. Some credit unions allow anyone to join, while others have specific criteria, such as serving active-duty military members, veterans, and their families.

Credit utilization ratio

Your credit utilization ratio is the amount of credit you're using compared to the total available. To calculate it, add up all the money you currently owe on credit cards and lines of credit, divide it by your total credit limits, and multiply that number by 100. For example, if you have one credit card with a $50 balance and a $1,000 limit and another with a $700 balance and a $2,000 limit, your credit utilization ratio would be 25%. A low credit utilization ratio makes it more likely that you can borrow money at a reasonable interest rate.

Creditor

A creditor is a financial institution or company that gave you a loan or extended credit. Credit card companies and banks are creditors for individuals. Businesses may also count companies and banks as creditors, along with other entities (like their suppliers).

Creditworthy

Being creditworthy means being suitable to get a loan, credit card, or other types of debt based on your credit history. Financial institutions may consider you creditworthy if you make payments on time and don’t use too much of your available credit compared to your credit limit. People with a history of late payments, defaults, bankruptcies, and maxing out credit cards are generally less creditworthy. They may have a more difficult time borrowing money.

Cryptocurrency

Cryptocurrency (crypto) is a digital currency not backed by a government agency. Because cryptocurrency is not associated with cash, it is strictly electronic. You can only use it for payment if the seller or merchant accepts your cryptocurrency type. You can buy cryptocurrency through exchanges, websites, apps, and specialized ATMs. The value of cryptocurrency can change dramatically daily and hour by hour.

Currency code

A currency code is a three-digit code representing a specific currency type. In 1978, the International Organization for Standardization established and updated the universal currency coding system to include new ones. Some standard currency codes include USD for the U.S. dollar, EUR for the euro, GBP for the Great Britain pound, JPY for Japanese yen, and CHF for Swiss franc.

D

Data breach

A data breach is when an organization loses control of its data or computer systems due to hacking. Data breaches can affect any entity, including retailers, hospitals, government organizations, and financial institutions. If your information is in a data breach, cybercriminals may gain access to data like your account number, name, address, date of birth, and social security number. They can then use this information to commit fraud or sell it to identity thieves. Organizations must notify you if your information is leaked due to a data breach.

Debit

A debit is a financial transaction where money goes out of an account. All debits have matching credits. When you swipe your debit card at the grocery store, you make a debit payment from your checking account, and the fund gets credited in the grocery store’s merchant account.

Debit card

A debit card is a plastic card that typically has a 16-digit number on the front and connects to an account at a financial institution. You can use the card in person or online to pay for goods or services. When you use your debit card to purchase something, the cost gets subtracted from the available balance of your bank account. Some debit cards also offer cash back, where you earn money on debit purchases. Most debit cards also work as ATM cards, allowing you to withdraw cash from your account.

Debt

A debt is money you owe to a person, organization, or government agency. Debts include loans, credit card balances, unpaid bills (for medical care and utilities), and outstanding taxes. Often, you pay interest on debts. Interest is a percentage of the balance the person or entity you owe money to regularly charges. When interest gets added to a debt, the cost to repay it will be more than what you initially borrowed or spent.

Debt consolidation

Debt consolidation involves getting a loan to pay off other debts. Then, you make a single payment to one lender rather than multiple payments to various organizations and entities. For example, you might get a debt consolidation loan to pay off the balances of 10 credit cards. Often, debt consolidation makes it possible to pay off debts more quickly and at a lower interest rate.

Debt financing

Debt financing is when a company borrows money and promises to repay it later. Businesses may do this by taking out loans from a financial institution or a vendor. With loans, companies must pay back the amount owed plus interest in installments, known as payments. Sometimes, businesses sell debt instruments to investors to acquire funds. Often, this means issuing bonds worth a certain amount. The company must pay back the face value plus interest when the bonds mature.

Debt-service coverage ratio

Debt-service coverage ratio (DSCR) measures a company’s available cash flow to pay current debts and cover new ones. To calculate DSCR, first by adding up the total amount of outstanding debt — including the principal and interest. This number gives you the total debt service. Next, determine your net operating income by subtracting your operating expenses from your gross revenue and other income. Then, divide your net operating income by your total debt service. For example, if your total debt service is $500,000, and your net operating income is $1 million, your debt-service coverage ratio would be 2.

Deductible

A deductible is an amount you must pay out of pocket before an insurance policy will pay for claims. For example, say you have a health insurance plan with a $1,000 deductible, and you get a medical bill for $2,000. The first $1,000 you paid will go to satisfying your deductible. Then, the insurance company will pay for the remaining $1,000 per the policy rules. Generally, insurance policies with a higher deductible charge a lower monthly premium. However, you’ll need to pay more before benefitting from your insurance coverage.

Demand

In business, demand is the willingness of consumers or companies to pay for your service or product. If the demand is high, you’ll usually have an easier time selling. Often, prices for goods and services increase when demand goes up and decrease when it goes down.

Depository institution

A depository institution is a financial institution that accepts deposits from the public in the ordinary course of banking or similar business. Commercial banks are the most well-known type of depository institution. Credit unions, savings and loan associations, and savings banks are other examples.

Depreciation

In accounting, depreciation means spreading out the cost of an asset over its useful life, so that the asset's value goes down gradually and is reflected correctly in the financial reports. For instance, a business may use depreciation to spread out the cost of a new piece of equipment over several years. Depreciation can also mean a loss in value. One example would be a car decreasing in value over time due to wear and tear.

Digital transfer

A digital transfer refers to the electronic movement of money from one account to another using digital technologies. These can include wire transfers, electronic fund transfers, or digital wallets. Such a transfer involves the secure and fast transmission of financial information and can occur domestically or internationally.

Direct deposit

A direct deposit is when money gets deposited into your account electronically. Generally, you get the money faster because you don’t have to wait for a check to arrive and then deposit at your bank. Many employers pay wages via direct deposit. You can also set up direct deposit to receive tax refunds and government benefit programs like Social Security, disability, and unemployment.

Dividend

A dividend is a portion of a company’s profits that shareholders receive regularly. If you own a stock that pays dividends, they can be paid out monthly, quarterly, semiannually, or annually. However, not all stocks pay dividends. Even those that do may suspend the payout if the company is under financial strain.

Doctoral degree

A doctoral degree is the highest academic degree awarded by universities. To obtain one, you typically must engage in independent research and present research findings. There are two types of doctoral degrees: the academic degree (PhD) and the applied degree (doctorate). Doctoral programs usually take four to six years to complete. Some programs will accept applicants who only hold a bachelor’s degree, while others will only consider individuals who already have master’s degrees.

Domestic money transfer

A domestic money transfer occurs when money is sent from one account to another in the same country. This can be done through a wire transfer or other type of digital transfer.

Donate

To donate means to give something away without expecting to be repaid. For instance, you can donate money or goods to a cause — such as giving canned food to a food bank.

E

Earn

To earn is to obtain something in return for labor or services. If you have a job, you perform work to earn a salary.

Earned income

Earned income is money from employment that you include on your income taxes. Examples of earned income include wages, salaries, commissions, and tips. Money from welfare benefits, compensation through unemployment or worker’s compensation insurance, annuities, pensions, and social security do not count as earned income.

Elder financial exploitation

Elder financial exploitation is a crime that occurs when a person illegally or improperly uses an elder’s money for their own gain. One example would be having a grandparent cosign for a loan they don’t truly need or understand. Other examples include scams targeting seniors.

Emergency fund

An emergency fund is a cash reserve that is set aside for unexpected circumstances. Individuals can establish emergency funds to cover major auto repairs and medical bills. Companies often create emergency funds to maintain business operations should a disaster occur. Some laws require businesses to have minimum balances to protect customers and shareholders.

Employer Identification Number (EIN)

An Employer Identification Number (EIN) identifies a business entity — such as sole proprietorships, partnerships, and corporations. Sometimes, the EIN is called a federal tax identification number or TIN. All entities must have an EIN, regardless of whether they have employees. You can apply for an EIN online.

Employer Identification Number (EIN) certificate

An Employer Identification Number (EIN) certificate is a document that displays your EIN — the number the IRS uses to identify a business or organization. When you apply for an EIN online, you’ll receive this certificate as a digital file that can be saved or printed. If you misplaced your EIN certificate, contact the IRS to obtain a new one.

Endorse

In business and finance, to endorse means to authorize payment or a transfer of funds by signing on the back of a financial instrument like a U.S. savings bond, check, or money order. When exchanging a financial instrument for cash, the financial institution typically asks you to endorse it by signing on the back. If you intend to deposit the money into a bank account, simply endorse the check or other financial instrument by writing "for deposit only" on the back.

Entrepreneur

An entrepreneur is someone who starts a new business. They come up with the business idea and create a firm to realize the idea. Entrepreneurs can seek money from banks, government programs, and investors to build a business. Some choose to self-fund their business, a practice known as bootstrapping. In 2019, there were 3.2 million immigrant entrepreneurs in the U.S.

Equity financing

Equity financing is when a business raises funds through the sale of shares. The investors contribute a certain amount of money and receive part ownership in the company, which may also include some decision-making control. For businesses, equity financing makes it possible to obtain funds without taking on debt.

Estate Tax

An estate tax is a tax paid on transferring property and money to other parties at the time of death. Each year, the IRS establishes a federal estate tax threshold. The value of an estate exceeding the threshold is subject to tax. For example, for an estate worth $15 million with an estate tax threshold of $12 million, the government would levy taxes on $3 million of the hypothetical estate.

Exchange rate

An exchange rate is how much one type of currency is worth in relation to another currency. For example, an exchange rate will determine how much money you get when you transfer U.S. dollars to euros. Exchange rates fluctuate based on economic factors.

Expected family contribution

An expected family contribution (EFC) is the total amount that the U.S. government expects a student’s family to pay towards that student’s college education. The U.S. Department of Education calculates the EFC based on the student’s family’s income, assets, benefits, family size, and related factors. Students with lower EFCs may be more likely to qualify for need-based financial aid.

F

FAFSA – Free Application for Federal Student Aid

The Free Application for Federal Student Aid (FAFSA) is an application for federal financial aid for higher education. Such aid can include federal grants, loans, and work-study funds for college or graduate school. U.S. citizens and permanent residents can apply for financial aid by completing this form.

Federal Income Tax

Federal income tax is a tax paid on annual earnings. U.S. citizens and non-citizens who earn more than a minimum amount must pay personal income tax annually. If you are employed, you will have federal income tax withheld from each of your paychecks. You’ll need to file an income tax return every year. If your total withholding is less than the money you owe, you’ll receive a refund from the IRS.

Federal minimum wage

The federal minimum wage is the lowest amount an employer can pay non-exempt employees under federal law. Employers must pay both citizens and non-citizens at least the minimum wage, unless they qualify as exempt. Examples of employees exempt from the minimum wage include full-time students, individuals with disabilities, tipped workers, and people under the age of 20 during their first 90 days of employment. States can set their own minimum wage requirements, but employees are entitled to the higher rate of the two. As of February 2023, the federal minimum wage is $7.25 per hour.

Federal student loans

Federal student loans are government-funded loans provided to students to help pay for their education, typically featuring lower interest rates and more flexible repayment options compared to private loans. Generally, both U.S. citizens and resident aliens are eligible for federal student loans. You’ll need to complete the Free Application for Federal Student Aid (FAFSA) form online to apply for student loans.

Federal Work-Study

Federal Work-Study is a government-funded program that provides part-time employment opportunities for eligible students, allowing them to earn money to help cover education-related expenses while enrolled in school. U.S. citizens and resident aliens are generally both eligible for federal work-study opportunities. The application process can be begun by completing the Free Application for Federal Student Aid (FAFSA) form.

FICA – Federal Insurance Contributions Act

The Federal Insurance Contributions Act (FICA) is a U.S. federal payroll tax that is deducted from each paycheck with matching contributions from employers. Money collected through FICA deductions helps fund both Social Security and Medicare programs.

FICO score

A FICO score is a credit score ranging from 300 to 850 that lenders can use to assess credit risk of a borrower. FICO stands for Fair Isaac Corporation and is the company that developed the first credit scoring system. Today, the top three U.S. credit bureaus issuingcredit scores are: TransUnion, Equifax, and Experian. Factors affecting your FICO score are payment history, credit utilization ratio, credit history length, diversity of credit portfolio, and number of recently opened credit accounts.

Fiat currency

Fiat currency refers to a monetary system where the currency is not backed by a physical commodity such as gold and silver but by the government issuing it. Most modern paper currencies are fiat currencies, including the U.S. dollar, the euro, the Japanese yen, the British pound, and the Swiss franc. Governments print paper money and mint coins, which they distribute to people for purchasing goods and services. Fiat currencies can also be used for electronic credits and debits, such as direct paycheck deposit from an employer’s bank account into an employee’s account.After the transaction is posted, money can be withdrawn in the fiat currency of U.S. dollars if the individual resides in the U.S.

Financial aid

Financial aid is money that helps cover the expenses associated with pursuing higher education, such as a bachelor’s or master’s degree program. It comprises two types of funding: non-repayable and repayable. Non-repayable assistance includes merit-based scholarships and need-based grants, whereas student loans must be repaid after graduation. Work-study programs that offer part-time job opportunities to earn money for education expenses also fall under the category of financial aid.

Financial capability

Financial capability refers to an individual’s ability to manage their money and credit responsibly. Key components of financial capability include developing and adhering to a budget, planning for significant expenses, and making timely payments towards loans and credit card bills.

Financial emergencies

A financial emergency is a situation that arises when unexpected expenses must be paid. Examples of financial emergencies include major car repairs, severe weather damage to a home, or an illness resulting in substantial medical bills.

Financial goals

Financial goals are objectives to improve your economic well-being. They can include saving money to buy a new home, setting funds aside for your children’s college education, being able to retire at a certain age and live comfortably, paying down debt, and establishing a budget. Setting financial goals can help you make good savings, investing, and spending decisions.

Financial information

Financial information is data related to the financial activities and performance of an individual or a business. For individuals, financial information can include bank and credit card numbers and the balances on various accounts. When used to describe businesses, the term typically refers to the figures shown on financial documents, such as income statements that show all of a company’s sources of revenue, and balance sheets that list a company’s assets and liabilities.

Financial institution

A financial institution is a business or entity that conducts business related to banking and finance. Examples of financial institutions include banks, credit unions, securities brokers, money services businesses, casinos, and card clubs.

Financial statement

A financial statement provides information about a company or individual’s finances. There are four fundamental types: balance sheets, income statements, cash flow statements, and statements of shareholders’ equity. A balance sheet lists a person's or business' assets, liabilities, and shareholder’s equity. An income statement outlines sources of revenue, expenses, and profits of a company. A cash flow statement tracks how money goes in and out of a business. A shareholders’ equity statement highlights how shareholder’s equity changes in value over time.

Financial transaction

A financial transaction is an exchange or transfer of goods, services, or funds. Purchases are financial transactions, but so is depositing money into a checking account or transferring money from one bank account to another. Buying and selling investments, such as stocks and bonds, and converting money from one type of currency to another are also examples of financial transactions.

Financial well-being

Financial well-being means being able to afford your basic needs and meet your financial goals. Saving money, investing for the future, and using credit wisely contribute to your financial well-being.

Fiscal year

A fiscal year is a 12-month period used by organizations, businesses, and governments to track financial activities and plan budgets. It is not necessarily the same as the calendar year, which runs from January 1st to December 31st. However it is defined, it must stay consistent for companies.

Fixed assets

Fixed assets are items that a business owns and uses to generate income. These assets are long-term and cannot be quickly converted into cash. Examples include buildings, equipment, and vehicles.

Fixed expenses

Fixed expenses are costs that don't change, even if you spend more or less. For example, your monthly rent or mortgage payment is a fixed expense. You pay the same amount each month, no matter how much you use the house or apartment. Other examples of fixed expenses include car payments, insurance, and subscriptions. These expenses are important to keep track of, so you know how much money you need each month and can budget accordingly.

Fixed interest rate

A fixed interest rate refers to a specific interest rate that remains constant over time, whether you are receiving or paying it. For instance, you may open a savings account that earns interest at a fixed rate of 1%, or take out an auto loan with a fixed rate of 4.2%.

Floating interest rate

A floating interest rate is a type of interest rate that changes periodically. The fluctuations depend on current economic conditions. Financial institutions and lenders often link floating interest rates to data such as the prime rate of interest, which is based on the federal funds overnight rate established by the U.S. Federal Reserve, or the Consumer Price Index (CPI) published by the U.S. Bureau of Labor Statistics. Floating interest rates can be found in various financial products such as mortgages, credit cards, and short-term investments.

Foreclosure

Foreclosure refers to a situation where a lender takes possession of a piece of land, a home, or a commercial building because the borrower has failed to make mortgage or equity loan payments. Foreclosure is usually the last resort for lenders, who will typically try to collect payments for several months before starting the foreclosure process. The process ‌begins with a court proceeding, during which the borrower can argue against the foreclosure. Ultimately, it is up to the judge to decide whether to issue the foreclosure order.

Foreclosure relief scam

Foreclosure relief scams are fraudulent schemes that target people experiencing financial hardship, particularly those facing the possibility of losing their homes. Scammers make false promises to help homeowners avoid foreclosure through various means, such as offering short-term loans or negotiating with creditors. In exchange for these services, they request payment of an upfront fee. Unfortunately, the fraudsters never deliver the service. Immigrants unfamiliar with the U.S. financial system or those who speak English as a second language may be particularly vulnerable to foreclosure relief scams.

Foreign transaction fee

A foreign transaction fee is a charge incurred when you use a debit or credit card to make a purchase in foreign currency. The fee is typically a percentage of the transaction amount and is automatically deducted from your bank account balance or added to your minimum credit card payment amount. Foreign transaction fees may apply when you send money internationally, shop online from a retailer in another country, or use your card while traveling abroad.

Form W-4: Employee’s Withholding Allowance Certificate

Form W-4: Employee’s Withholding Allowance Certificate is an IRS tax document that is usually completed when an individual starts a new job. The purpose of the form is to gather information on whether the employee holds multiple jobs, if their spouse works, and the number of dependents claimed. The employer uses this information to determine how much federal income tax to withhold from the employee’s paychecks.

Franchise agreement

A franchise agreement is a legal contract between a franchisee (someone who wants to operate a franchise) and a franchisor (the owner of the franchise brand). The agreement outlines the terms and conditions for operating the franchise, such as the use of the franchisor's trademark, the franchise fees, and the obligations of the franchisee.

Fraud

Fraud is an intentional deception that is done for financial or personal gain. It can include a wide range of illegal activities, such as identity theft, insurance fraud, and investment scams. Fraud can result in financial losses for individuals and businesses.

G

Gig

A gig refers to a temporary job or project, often in the context of the gig economy. In the gig economy, workers are hired on a short-term or freelance basis to complete specific tasks or projects. Examples of gig work include driving for ride-sharing companies or delivering food for a meal delivery service.

Gig economy

A gig economy is a labor market characterized by short-term contracts or freelance work, as opposed to permanent jobs. Workers in the gig economy may work for multiple employers or clients, often through online platforms.

Given period

A given period refers to a specific amount of time, such as a day, week, month, or year. It is often used to refer to a period during which certain activities or events occur, such as the period of a rental agreement or the given period for making a payment.

Goods

Goods are tangible items that are produced or sold for a profit, such as clothing, food, electronics, and furniture. In the context of business, goods can also refer to the raw materials or components used in the production of finished products.

Government benefits card

A government benefits card is a prepaid debit card issued by a government agency to distribute benefits such as unemployment, welfare, or disability payments. Recipients of government benefits can use the card to make purchases or withdraw cash at participating merchants and ATMs.

Grace period

A grace period is a set amount of time after a payment is due, during which you are not charged any fees or penalties. This period gives you some extra time to make a payment without being penalized.

Grant

A grant is money given to an individual or organization for a specific purpose, such as to fund a project or start a business. Grants do not need to be paid back, unlike loans.

Gross income

Gross income is the total amount of money you earn before any deductions are made, such as taxes or other expenses. It includes your wages, tips, and any other sources of income.

Gross profit

Gross profit is the total amount of money a company earns from selling goods or services, minus the direct costs of producing those goods or services. This represents the company's earnings before accounting for other expenses such as overhead or taxes.

Guarantor

A guarantor is a person who agrees to pay off a borrower's debt if the borrower defaults on their loan. If someone asks you to be their guarantor, it means they need your help to get a loan. Being a guarantor is a serious responsibility because you will be held responsible for paying off the loan if the borrower cannot.

Health savings account

A health savings account (HSA) is a type of savings account that is used to pay for medical expenses. HSAs are available to individuals who have a high-deductible health plan (HDHP). They allow individuals to save money on a tax-free basis, which can be used to pay for qualifying medical expenses, such as doctor's visits, prescriptions, and medical procedures.

Homeowner's insurance

Homeowners insurance is a type of insurance that provides coverage for damage to a person's home and their belongings. Homeowners insurance policies typically cover damage caused by natural disasters, theft, and other types of damage. If something happens to your home or belongings that are covered by your insurance policy, the insurance company will pay for the damages up to the policy's limit.

I

Identity theft

Identity theft is when someone steals your personal information, such as your name, address, social security number, or credit card number, to commit fraud or other crimes. They might use your information to open credit cards, take out loans, or make unauthorized purchases in your name. Identity theft can be a serious problem, and it can take time and effort to fix the damage that's been done. It's important to protect your personal information and monitor your accounts regularly to detect any suspicious activity.

Imposter scam

An imposter scam is a type of fraud where a scammer poses as a trustworthy person or organization to trick you into giving them money or personal information. They might pretend to be a government agency, a bank, or a well-known company to gain your trust and convince you to send them money or reveal your sensitive information. Imposter scams are becoming more common, and they can be very convincing, so it's essential to be cautious and verify the legitimacy of anyone who asks you for money or information.

Impulse purchase

An impulse purchase is an unplanned purchase that you make on a whim, without much thought or consideration. It's usually something that you see and decide to buy on the spot, without planning for it beforehand. Impulse purchases can be anything from a candy bar at the grocery store checkout to a fancy pair of shoes you see in a store window.

Inactivity fee

An inactivity fee is a charge that financial institutions apply to accounts that are not used for a specific period or don't meet certain requirements. It can be added to different types of accounts, like savings and credit cards, and it can reduce your account balance over time.

Income

Income is money you earn or receive to pay for your expenses, save for the future, or pay off debts. Some examples of income include wages earned through a job or gig work, withdrawals from pension and retirement accounts, and benefits from Social Security, unemployment insurance, or welfare programs.

Income statement

An income statement is a document that shows how much money a business makes and spends during a specific period. It's like a report card for the company's finances. The statement includes information about the company's revenue, expenses, and profits (or losses) over the given period. It's an essential tool for businesses to track their financial performance and identify areas where they can improve their profitability.

Income tax

Income tax is a tax that individuals and businesses have to pay to the government based on how much money they make. In the US, you have to pay federal income tax every year if you earn above a certain amount, whether you're a citizen or not. Depending on where you live, you may also have to pay state and local income taxes.

Individual Taxpayer Identification Number (ITIN)

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service (IRS) to identify individuals who are required to file a tax return but are not eligible for a Social Security number. Some financial institutions may also require an ITIN to open a bank account, obtain a loan, or apply for a credit card. The IRS provides information on how to apply for an ITIN on their website.

Inflation

Inflation is a term used in economics to describe the rate at which the prices of goods and services increase over time. This means that as inflation rises, the purchasing power of your money decreases, which means you can buy less with the same amount of money. Inflation can be caused by a variety of factors, such as an increase in demand for goods and services, an increase in the cost of production, or a decrease in the supply of goods and services.

Installment loan

An installment loan is a type of loan that is repaid over time with regular payments, or installments. This means that you borrow a fixed amount of money and then pay it back in smaller, equal amounts over a set period, such as six months, a year, or several years. The payments typically include both the principal loan amount and interest, which is the cost of borrowing the money. Installment loans are common for personal loans, auto loans, and mortgages, and they can help you finance large purchases or expenses over time. With installment loans, you know exactly how much you need to pay each month, making it easier to budget and plan for the future.

Insurance

Insurance is a contract between you and an insurance company that provides financial protection against the unexpected. You pay a fee called a premium, and in exchange, the insurance company agrees to cover some or all of the costs if something bad happens, like a car accident, fire, or theft. Insurance can help protect you and your business from financial loss and liability, and it can provide peace of mind knowing that you're prepared for the unexpected.

Insurance company

An insurance company, also known as an insurer, issues insurance policies and collects premium payments and fees from customers. Insurance policies can include health, car, life, homeowners, or another type of insurance.

Insured

Insured is a term that can have two meanings in insurance. First, it refers to a person or entity that has purchased an insurance policy against potential losses. Second, it can refer to the policyholder specifically, as indicated in insurance or legal documents. For instance, a policy may state that “the insured will pay a premium of $200 on the 15th of every month.”

Insurer

An insurer is a term that refers to an insurance company. Insurers issue policies to individuals and businesses, and collect premiums and fees as payments.

Intangible asset

Intangible assets are valuable assets that do not have physical substance. Examples of intangible assets include licenses, trademarks, copyrights, goodwill, computer software, research, and creative works. Valuing intangible assets can be challenging, and they may not carry the same weight as tangible assets when making investment or lending decisions.

Interest

Interest is a term used in finance that refers to the cost of borrowing money. When you take out a loan, you'll need to pay back the principal amount you borrowed plus interest, which is usually calculated as a percentage of the total amount you borrowed. The interest rate determines how much you'll need to pay back over the life of the loan. On the other hand, when you deposit money into an account or make an investment, interest is the amount of money you earn for keeping your money with a financial institution. The interest rate you earn is based on the account balance and the length of time you keep your money deposited.

Interest amount

An interest amount is the dollar amount of interest that a lender charges for a loan or a financial institution pays for a deposit account or investment. It is calculated as a percentage of the borrowed amount or the account balance. The interest amount can be fixed (meaning it stays the same over time) or variable (meaning it can increase or decrease).

Interest capitalization

Interest capitalization happens when unpaid interest on a loan gets added to the total amount you owe. It's common with student loans, where interest builds up during a grace period or forbearance. When the grace period or forbearance ends, the accrued interest gets added to the loan balance. This increases the total amount you owe and could affect your monthly payments. Interest capitalization might also occur if you switch repayment plans.

Interest rate

An interest rate is a percentage that banks use to calculate the interest on your loans or investments. They use this rate to determine how much to add to your savings account, certificate of deposit, or investment account. When you take out a loan, open an account, or invest your money, you'll be given information about the interest rate.

Interest payment

This is the amount of money you pay to cover the interest charged on a loan or credit card. When you make a payment, it's first applied to the outstanding interest, and the remaining portion is used to pay down the principal. Payments made towards interest only cover the interest portion and do not reduce the principal balance.

Interest Revenue Service (IRS)

This is the U.S. government agency responsible for enforcing federal tax laws. The IRS collects tax payments and maintains tax records for all taxpayers, including non-citizens. It investigates tax fraud and audits organizations and businesses to ensure compliance with tax regulations. Additionally, the agency issues publications and notices to educate the public about tax laws and regulation changes. It also provides taxpayer assistance and investigates issues such as uncredited tax payments.

International Bank Account Number (IBAN)

This is a unique identifier used for international financial transactions. It consists of a country code, check digits, a bank identifier, and a basic bank account number that designates the account to which funds should be transferred or deposited at the bank. This system is designed to ensure that funds are directed to the correct overseas bank account.

International money transfer

This is when money is sent from one country to another. This can be done through a bank-to-bank system, such as the SWIFT wire transfer system, or through online platforms and apps like Remitly.

Invest

This means committing capital with the aim of generating positive returns. This can include investing in a small business or in financial instruments such as stocks and bonds.

Investment

This is an asset or venture acquired in the hopes of earning a profit. All investments carry some level of risk, meaning that there is a chance of losing money. Examples of investment options include stocks, bonds, mutual funds, annuities, and even businesses.

Invoice factoring

This is when a business sells its outstanding invoices to a third party to improve cash flow. The factoring company pays a percentage of the total outstanding debt, and when the customers pay, the money goes to the factoring company rather than the wholesaler.

Invoice financing

This is when a company borrows money against the amount due from its customers. The outstanding invoices serve as collateral for the loan, meaning that the lender can take them over and collect the money paid by the customers if the borrower defaults on loan payments.

Irregular income

This refers to earnings that a person or business receives intermittently or unpredictably, such as bonuses based on performance, dividends paid out based on stock performance, and winnings from a lottery or sweepstakes.

Issuer

An issuer is an individual or entity that supplies or distributes something. In finance, an issuer is an organization that creates and sells financial securities such as bonds, notes, and stocks. The person buying securities from an issuer is the investor.

J

Job

A job is a paid position in which an individual works as an employee. Payment is usually received in the form of wages or salary, which can be divided into regular payments such as hourly, weekly, biweekly, or monthly.

M

Mail fraud scam

Mail fraud scams involve criminals contacting you via mail to steal money. They often target immigrants and seniors. If you receive a notice about unexpected winnings or unfamiliar debts, research the sender before providing personal information or sending money.

Market value

Market value represents the current worth of something based on economic conditions and demand. It affects property tax and borrowing limits when using collateral.

Masters degree

A master's degree is a graduate-level academic credential. Typically, you need a bachelor's degree to enter a master's program. Master's degrees often take one to two years of full-time study to complete.

Maturity date

The maturity date is the final payment date for an installment loan or when an investment stops earning interest or reaches full value. Annuities, bonds, and CDs have maturity dates.

Medicaid

Medicaid provides health coverage for individuals with financial needs and disabilities. Funded by the federal government, each state sets its own rules. Eligibility varies based on location, but legal permanent residents may qualify in many states.

Medicare

Medicare is health insurance for people aged 65 and older, individuals with disabilities, and those with end-stage kidney disease. The federal government or private insurance companies partnering with the government pay for some expenses, while you cover the rest. Some plans require monthly premiums. U.S. citizens and legal permanent residents who meet requirements can enroll.

Merchant cash advance

A merchant cash advance is a loan from a credit card processing company. Businesses receive a lump sum and repay it with a percentage of monthly credit and debit card sales, plus interest fees. These advances can increase cash flow but often have higher interest rates than bank loans.

Microloan

Microloans are small business loans of $50,000 or less. Businesses receive a lump sum and agree to repay the loan with interest over a set term, usually with monthly payments.

Minimum payment

A minimum payment is the amount required to keep credit card or line of credit accounts in good standing. Lenders usually require 2% to 5% of the outstanding balance, plus accumulated interest. Paying more than the minimum can reduce interest over time.

Minimum wage

Minimum wage is the lowest hourly pay employers can offer. The federal government sets a national minimum wage, but state and local governments can set higher rates. Tipped workers, full-time students, and individuals with specific disabilities may receive less than the minimum. People under a certain age may also earn less during their first 90 days. Minimum wage laws generally apply to legal immigrants and U.S. citizens.

Mobile banking

Mobile banking lets you check your balance, make transfers, and complete tasks online. Banks often provide mobile banking websites for computers and mobile devices. Ask your bank about mobile banking features and fees.

Mobile wallet

A mobile wallet is an app that stores financial information, such as debit and credit card numbers, bank account numbers, and payment app login details. With a mobile wallet, you can make electronic payments online or in person. To protect your information, consider password-protecting your mobile device.

Money

Money, which has value, can be used to buy and sell items or pay for services. It typically takes the form of coins, paper bills, or electronic funds in bank accounts.

Money market deposit account

A money market deposit account (MMDA) is a savings account with a higher interest rate than regular savings accounts. Financial institutions may charge fees for MMDAs, but often waive them if you maintain a minimum balance. Many MMDAs come with checkbooks but limit you to six checks per month. You can transfer funds from MMDAs to checking accounts online, by phone, or in person.

Money order

A money order is a financial instrument issued by financial institutions or government agencies, like the U.S. Post Office. Recipients can cash or deposit money orders like checks. When you purchase a money order, you provide the funds, so the recipient doesn't need to worry about fund availability. Money orders can be purchased at banks, credit unions, grocery stores, convenience stores, big box stores, and U.S. post offices, usually for a small fee in addition to the face value.

Money transfer

Money transfers move funds between people, using wire transfers or mobile transfers. Financial institutions handle wire transfers between bank accounts, while brick-and-mortar businesses, websites, and apps offer money transfer services. Bank accounts, credit, or debit cards can fund money transfers, and recipients may receive funds via cash app, bank account, or pickup location. Remitly is a mobile money transfer service example.

Money transfer fees

When sending money to someone, you might pay money transfer fees for wire and mobile transfers. International transfers may also incur currency exchange fees.

Moral hazard

Moral hazard occurs when individuals or companies ignore risk reduction measures, believing something will protect them from losses. For example, a company providing essential services might make risky investments, assuming government bailouts if investments fail.

Mortgage

A mortgage is a property-secured loan used to buy property or access funds for purposes like starting a business or paying off high-interest credit cards. Lenders provide borrowers with a lump sum, which is repaid through monthly payments and interest. If borrowers default on payments, lenders can seize and sell the property to recover their money.

Mutual fund

Mutual funds pool money from investors to purchase various financial instruments like stocks, bonds, and short-term debt. Companies offer different mutual funds with varying risk levels and potential returns. Non-citizens can invest in US mutual funds but may need Individual Tax Identification Numbers (ITINs) to open accounts and invest.

N

Needs

In personal finance, needs are essential items for survival and functioning, such as food, water, shelter, clothing, and mental well-being components like security and self-esteem.

Net income

Net income is the remaining money a company has after deducting expenses and taxes. To calculate, subtract the sum of production costs, additional expenses, and taxes from total sales.

Net worth

Net worth is the difference between your total assets and liabilities. Add the value of all your possessions and subtract your total debts to calculate your net worth.

O

Occupation

An occupation is a money-earning activity, such as teaching, laboring, bartending, practicing law, medicine, or accounting.

Online banking

Online banking enables virtual bank account access via websites or mobile apps. Features vary, but you can generally check balances, review transactions, and transfer money between accounts. Some institutions offer additional services like check ordering, bill payment, and money transfers. Online banking costs vary, with many banks offering free access.

Online or mobile bill payment

Online or mobile bill payment allows electronic payment through websites or mobile apps. You can set up one-time or automatic payments, and the service will issue electronic payments or mail checks as needed.

Open-loop prepaid card

An open-loop prepaid card looks like a credit card and features a Visa, MasterCard, Discover, or American Express logo. Load and reload the card with funds, then use the card to make purchases. Your spending is deducted from the card's available balance, and you must reload the card when the balance reaches $0.

Open-loop prepaid card

Opportunity cost

Opportunity cost is the lost benefits when choosing one option over another. For example, if you spend unexpected bonus money on sneakers, the opportunity cost is the interest you would have earned by depositing the money in a bank.

Out-of-pocket cost

Out-of-pocket costs are expenses paid directly by you, often associated with health insurance. Examples include copays for doctor visits or a percentage of medical bills not covered by insurance.

Overdraft

An overdraft occurs when you spend more than your bank account balance. Banks may allow overdrafts and charge an overdraft fee for transactions that exceed your account balance.

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Paper check

A paper check is a payment instrument that can be deposited for cash or exchanged for cash. Paper checks include the date, payee, payment amount, account holder's signature, and an optional memo line. The bank deducts the check amount from your bank account when the recipient deposits or cashes it.

Password

A password is a unique word, phrase, or character combination required for accessing mobile apps or online accounts. To enhance security, use different, hard-to-guess passwords for each site or app. Strong passwords include random letters, numbers, and special characters.

Pay period

A pay period is a timeframe used to calculate employee wages. Companies may use a two-week pay period, paying employees once every two weeks for hours worked during the previous two weeks. Salaried employees receive a portion of their annual salary every two weeks, calculated by dividing their yearly salary by 26.

Payable

Payable can refer to something that must be paid or to the accepted payment methods. For example, rent can be "payable on the 3rd of every month" or costs can be "payable by cash, check, or credit card."

Paycheck

A paycheck is a paper check received from an employer as payment for work. The term is also used to refer to direct deposit payments. When people say, “I need to see if my paycheck is in my account," they are checking if their direct deposit has arrived.

Payroll card

A payroll card is like a plastic card that your boss can put your paycheck on. It works like a credit card and has logos from big companies like Visa, MasterCard, Discover, and American Express. You can use it to buy stuff from any store. But, if you spend all the money on the card, you have to wait for your next paycheck to put more money on the card.

Payroll tax

This is a tax that your employer deducts from your paycheck and pays to the government. This tax is used to pay for things like Social Security, Medicare, and unemployment benefits.

Personal guarantee

A personal guarantee is a promise you make to take responsibility for a debt or a financial obligation. For example, if you take out a loan for your business and sign a personal guarantee, you're saying that you'll pay back the loan even if your business can't.

Personal Identification Number (PIN)

A Personal Identification Number (PIN) is a secret code that you create to access your bank account or use a debit card. You enter this code when you withdraw money from an ATM or make a purchase with your card. It's important to keep your PIN private so that no one else can access your account or steal your money.

Phishing scam

A phishing scam is when someone tries to trick you into giving away your personal information, such as your password or credit card number. This is usually done through fake emails or websites that look real. The scammers use these fake emails or websites to make you think they are from a legitimate company or organization that you trust. They might ask you to click on a link or enter your information, and then they can use that information to steal your money or identity.

Policy

A policy can have two different meanings in business and finance terminology. One definition is a rule or procedure a company establishes for its employees to follow. An example is a dress code policy that tells you what to wear to work. A policy can also refer to a contract between a person or business and an insurance company. It describes the insurance coverage the company will provide to the individual or business and includes information about the premiums and fees the insured must pay.

Policyholder

In insurance terminology, the policyholder is the person who owns an insurance policy. You’ll typically see the word used concerning life insurance. With life insurance, you can take out a policy on yourself or someone you have a relationship with (like your spouse or business partner, with their permission). If you buy life insurance for your spouse, they are the insured (the person whose death will trigger a death benefit payout), and you would be the policyholder because you purchased and paid for the insurance.

Premium

In insurance terminology, a premium is an amount you pay in exchange for insurance coverage. It's like a subscription fee for your insurance.

Prepaid card

A prepaid card is a payment card linked to an account that isn’t a bank or a credit card account. When you get a prepaid card, you load funds onto it. Then, you can spend up to the amount you put on the card. At that point, you must add more funds to continue to use the card. Most prepaid cards feature logos for major credit card networks (like Visa or MasterCard). You can use the prepaid card anywhere that accepts cards from that network.

Prepayment

Prepayment is when you pay off a loan early. For example, paying off a 30-year mortgage in 20 years is prepayment. Lenders make less money off a loan because you pay less interest. That’s why some lenders charge fees for prepayment.

Prepayment penalty

A prepayment penalty is a fee you owe if you pay off a loan early. When you take out a loan, a lender agrees to provide you with a lump sum in exchange for your promise to pay interest over the full term. If you pay the loan sooner, you pay less interest, so the lender makes less money. Prepayment penalties are a way for lenders to minimize this cost.

Principal

In lending terminology, the principal is the money you borrowed when you took out a loan. It differs from the interest (the percentage of the amount borrowed the lender charges you as a fee for borrowing). When you make a monthly loan payment, a portion of the money goes toward paying off interest. Then, the rest goes toward paying down the principal. If you make an extra loan payment, you can specify that you want the money to go to the principal only. Structuring payments this way can help you pay off loans faster while reducing the total amount of interest paid over a loan term.

Private student loans

A private student loan is a loan you get through a private organization to cover the costs of post-secondary education. Credit unions and banks are the most common providers of private student loans. Private loans differ from federal student loans funded by the United States government. Each financial institution can establish its eligibility criteria, terms, and interest rates for private student loans. Private lenders look at your income, credit history, and total debt when deciding whether to grant a student loan.

Profit

Profit is the money you make by selling something or providing a service after determining the costs to make and sell it. To calculate profit, subtract total expenses from total sales. For example, a company with sales revenue of $1 million and $500,000 in expenses would make $500,000 in profit.

Profit & loss statement

A profit and loss statement outlines how much income a business brought in during a period versus how much it spent. At the top of the statement is the total income for the period. Below that, the company lists all expenses and records the amount paid for each. Then, the company totals all the expenses. At the bottom of the profit-and-loss statement, the company records net income by subtracting the total expenses from the total income.

Proof of address

Proof of address is documentation that proves you live somewhere. As an immigrant, you may need to provide proof of address to register your child for public school, get a driver’s license, or open a bank account. What an agency or institution will accept as proof of address varies. Some examples include an identification card with your address printed on it or a piece of mail (like a utility bill, magazine, or tax notice) that shows your name and address.

Property tax

Property tax is a tax you pay on the value of your property, such as your house or land. The government uses this tax to help pay for things like schools, roads, and public services in your community. The amount of property tax you pay is usually based on the value of your property and is determined by your local government. Property tax is usually paid once or twice a year, and it's important to pay it on time to avoid any penalties or fees.

Protect

Protecting in finance and business means safeguarding assets or money by taking measures such as insurance, wise investments, or depositing funds in a bank. These actions minimize the risk of loss for valuable assets, like money, cars, or homes.

Public college or university

Public colleges or universities are post-secondary schools funded by state governments. They typically have separate tuition rates for state residents and nonresident students. Non-U.S. citizens may also qualify for in-state tuition.

Public service announcement (PSA)

A PSA is a message created by a government agency or nonprofit organization to raise awareness about an important issue. Broadcasters and websites often run PSAs for free, making them accessible to the public.

Purchase price

The purchase price is the amount paid for an item. It may equal the item's value but not always, like when buying a used vehicle for a lower price from a family member.

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Raise

A raise is a lasting increase in the salary for a job. Employers can offer raises as a set amount or percentage, either based on time with the company or performance.

Rate of return

The rate of return is the percentage representing an investment's gains or losses over a specific period. It helps evaluate the performance of an investment.

Real estate

Real estate refers to properties, such as land and buildings, that can be bought or sold. Real estate agents assist in these transactions.

Rebate

A rebate is a partial refund received after purchasing an item, either from a manufacturer or as a tax rebate from the government.

Receivable

A receivable is an expected payment or item owed to a person or business, often referring to accounts receivable or unpaid customer accounts for products or services already provided.

Reconcile

Reconciling in finance means verifying transactions by comparing documents like bank statements and account ledgers. This process helps identify errors and prevent overdrawing accounts.

Regular income

Regular income is money received consistently, such as wages, pensions, Social Security payments, or annuities.

Remittance

A remittance is a payment made through cash, check, credit card, or electronic means like wire or money transfers.

Remittance rates

Remittance rates are annual interest rates charged by a lender, calculated by subtracting service fees and other monthly fees from the base interest rate.

Repayment

Repayment refers to paying back borrowed money in scheduled installments, including interest, during the loan's repayment period.

Retained earnings

Retained earnings (RE) are the leftover funds of a business after paying dividends to shareholders, originating from the company's net profits.

Retirement plan

A retirement plan is a savings method for retirement, often involving tax-advantaged accounts that earn interest through securities trading.

Return

A return measures the performance of an investment, indicating either gains (positive return) or losses (negative return).

Revolving line of credit

A revolving line of credit is a reusable pool of money that can be borrowed, paid back, and used again, with minimum monthly payments based on the amount borrowed plus accrued interest.

Risk

In finance, risk refers to the potential of losing money, such as high-risk stocks with volatile values or low-risk investments like U.S. savings bonds.

Routing number

A routing number is a nine-digit code representing a specific bank or financial institution, used for direct deposits, online payments, and money transfers between accounts.

S

Salary

A salary is a set amount of money you earn over a specific period, like a year or a month. For salaried employees, employers divide the annual salary by the number of pay periods in a year to calculate paychecks. This is different from hourly wages, where employers multiply the hours worked by the hourly rate.

Sales tax

Sales tax is a fee you pay when buying certain items or services. You pay the tax to the seller or service provider, who then submits it to the state or local government agency. Sales tax laws vary by state and locality, with some states having no sales tax and others taxing specific goods and services.

Save

Saving means putting money aside for the future, like depositing it into a bank account, educational savings account, or retirement account. People also say they "saved money" when they get discounts on purchases or services.

Savings

In finance, savings refer to money you've put in an account for future use. For example, if you have $3,000 in a savings account and $2,000 in a retirement account, your total savings is $5,000. Savings can also mean money you didn't spend due to a discount, like saving $20 on a $100 pair of shoes.

Savings account

A savings account is a bank account designed for keeping money aside for short-term or long-term goals. Banks pay you a fixed interest rate on your account balance. You may need to maintain a minimum balance to avoid fees. You can withdraw money from the account, transfer funds electronically, use ATMs, or make electronic payments, but most banks limit you to six electronic transactions per month and charge fees if you exceed the limit.

Savings goal

A savings goal is a specific amount of money you aim to save within a certain time frame. You might have a weekly goal of saving $10 or a long-term goal of saving $500,000 before retiring at 65.

Scam

A scam is an illegal scheme that deceives people to steal their money. Scammers may pose as someone else, make up stories, or use fake websites, emails, or messages to trick victims into sending money. Scammers often target senior citizens and immigrants who may not fully understand the financial system.

Scholarships

Scholarships are merit-based awards to help cover education costs. You can qualify for scholarships based on your grades, test scores, volunteer work, artistic or athletic achievements. Scholarships don't need to be repaid but may require maintaining a minimum GPA. Some scholarships are available to immigrants, and you can search for opportunities using the CareerOneStop search tool.

Secured credit card

A secured credit card requires a cash deposit. You give the credit card company a sum of money, like $1,000, and receive a credit card with a credit limit equal to or slightly less than the deposit. If you fail to pay your bills, the company uses your deposit to settle your debt. If you close your card with a zero balance and have made all required payments, you get your deposit back. Secured credit cards are generally easier for people with no credit history to obtain.

Secured loan

A secured loan involves collateral, like property, that you pledge as security. If you don't make payments, the lender can seize the collateral and sell it to recover the money owed. Mortgages, home equity loans, and auto loans are common secured loans, but you can also use life insurance policies, certificates of deposit, and other valuable items as collateral for some loans.

Security

In finance, security refers to financial security or financial instruments like stocks or bonds. You may hear terms like "buying and selling securities" or "Securities Exchange Commission (SEC)," which oversees securities sales.

Sending limit

A sending limit is the maximum amount you can send through an electronic money transfer. This limit can apply to a single transaction or the total amount of transfers you make daily or monthly.

Services

In finance, services are actions you pay for, unlike goods (tangible objects you buy and sell). Examples of services include marketing, banking, travel reservations, tax preparation, and education.

A share represents a portion of ownership in business and finance. One unit of stock is usually called a share. If you own a 50% share of a business, you own half of the company.

Short-term

Short-term refers to something happening relatively soon, often within the next 12 months. For instance, a short-term loan might be one you plan to repay within nine months, or a short-term certificate of deposit could mature in six months.

Short-term goals

Short-term goals are objectives you aim to achieve soon, usually within a year. For example, a short-term financial goal might be to save $500 over the next three months. People often break down long-term goals into smaller short-term goals, like paying off a specific credit card within six months as part of a 10-year plan to eliminate all credit card debt.

Side hustle

A side hustle is a way to earn extra money. It could be a second job, a part-time small business, or a gig like freelancing or driving for a ride-sharing app. Many immigrants have side hustles to save money or send funds to loved ones in other countries.

SMART goals

A SMART goal is specific, measurable, achievable, relevant, and time-bound. For example, if someone wants to buy a home, their SMART goal could be, "I will save $500 from my $3,000 monthly income over the next two years for a home down payment." This goal is specific, measurable, achievable, relevant, and time-bound.

Social Security

Social Security is a program providing income to retired individuals, people with disabilities, survivors of deceased workers, and dependents of retired or disabled workers. Funded by payroll and self-employment taxes, you can qualify for Social Security income if you or your spouse contribute to the system long enough and meet specific criteria. The program began with the Social Security Act signed by President Franklin Delano Roosevelt on August 14, 1953.

Social Security number

A Social Security number (SSN) is a nine-digit number assigned to U.S. citizens, permanent residents, and some eligible non-immigrant workers by the Social Security Administration. You may need an SSN to open a bank account, pay taxes, apply for financial aid, or other purposes. If you don't qualify for an SSN due to immigration status, you can apply for an Individual Taxpayer Identification Number (ITIN) instead. Your SSN is sensitive information, so only share it when necessary and with trusted parties.

Specified period

In banking and finance, you’ll see this phrase concerning installment loans. A loan agreement may say the borrower will make monthly payments of $600 throughout the specified period. In this case, the specified period would be the loan term.

Spend

To spend means to pay money for something. You spend when you buy a product or service. The opposite of spending is saving, which means keeping money to use in the future.

Spoofing

Spoofing means imitating something. In banking and finance terms, spoofing refers to a scam where criminals trick people into believing they represent a company, nonprofit organization, or government agency by creating official-looking text messages, social media messages, website addresses, or email addresses.

State income tax

State income tax is a tax that individual U.S. states charge on the money residents, non-residents, and businesses make within their borders. Each state has its own tax rates and rules, and not all states have an income tax – some use other types of taxes, like sales or property taxes, to bring in money. State income taxes usually help pay for public services like schools, healthcare, and roads in the state.

Statement of cash flow

A cash flow statement is a financial report that displays a business's incoming and outgoing money. It generally covers three areas: operating activities (e.g., sales and taxes), investing activities (e.g., buying or selling assets), and financing activities (e.g., loan payments). Various methods exist for calculating cash flow, and an accountant can assist in creating precise statements for investors and lenders.

Stock

Stock is a fraction of ownership in a company. Public stock is available for anyone to buy through the stock market. One unit of stock is a share. The more shares of a company you own, the more ownership you have in a company.

Stock market

The stock market is an exchange that allows people to buy and sell shares of public stock and other financial securities. To access the stock market, you can go through a broker who makes trades on your behalf or use a website to buy and sell stock yourself. Typically, brokers and trading websites charge fees for transactions.

Student aid report

A student aid report is a document you receive from the U.S. Department of Education after you fill out the Free Application for Federal Student Aid (FAFSA) form. The report tells you whether you qualify for financial aid and breaks down the grants and loans you can access to help pay for the cost of higher education. The U.S. Department of Education may send your student aid report electronically or by mail.

Student bank account

A student bank account is a checking or savings account for high school and college students. Most student bank accounts allow you to access funds with checks and a debit card. They typically have lower minimum balance requirements and fewer fees. Many financial institutions will allow student bank accounts for non-U.S. citizens. Ask the bank directly if this is the case.

Student loan servicer

A student loan servicer is a company that handles billing and payment collection for federal student loans. If you have questions about repayment plans, your loan payment history, or anything else regarding your federal student loans, you typically need to contact the student loan servicer.

Subscription

A subscription is a payment arrangement granting access to a product or service for a specific duration. For instance, an annual magazine subscription involves an upfront fee, and you receive monthly issues for a year. Subscriptions are common for software, newspapers, and streaming services, and typically auto-renew unless canceled.

Supply

In business and finance terms, supply is the amount of something available for purchase. When there is an ample supply of something, more of the item is available to buy, so merchants typically sell it for a lower price. On the other hand, a limited supply can raise prices, particularly with items in demand.

A SWIFT code is a number that represents a financial institution that is a member of the Society for Worldwide International Financial Telecommunications (SWIFT) network. Financial institutions use this network to transfer money electronically from one account to another. If you want to make a money transfer through a bank that uses SWIFT, you'll need to know the SWIFT code for the recipient's bank.

T

Tariff

A government charges a tariff fee on items that are imported or exported. The purpose of a tariff is to allow manufacturers in a country to compete with foreign companies. The companies that import and export products pay the tariffs. Occasionally, they may raise the sale price of items to repay the money paid in tariffs. Some countries charge individuals tariffs or customs duties who receive international packages containing certain items. If you send gifts home to loved ones, double-check with their country's customs agency to find out if they’ll need to pay tariffs to receive the package.

Tax deduction

A tax deduction is a financial incentive that reduces taxable income by allowing taxpayers to subtract certain expenses, ultimately lowering their tax liability. Common deductions include home mortgage interest, medical expenses, charitable contributions, and student loan interest. Deductions are categorized as standard or itemized. The standard deduction is a fixed amount, while itemized deductions require taxpayers to list and substantiate individual expenses.

Tax lien

A tax lien is a claim against something you own put in place because you have unpaid taxes. A federal, state, or local government may put a lien on your home, vehicle, or other assets if you cannot pay taxes and don't make other payment arrangements. The lien will remain until you pay the total amount due. If you try to sell the asset before you settle the lien, the government agency will take the amount owed from the selling price.

Tax refund

A tax refund is money you get back from federal, state, or local governments if you've overpaid your income taxes. This can happen when your employer takes too much from your paychecks or if you're eligible for tax deductions that lower your tax bill. To receive your refund, you can provide your bank's routing and account numbers for an electronic payment. If not, you'll usually get your refund as a check.

Tax-related identity theft

Tax-related identity theft is when someone uses your personal information to file a fraudulent tax return. To commit this crime, fraudsters typically only need your name, address, and social security number. When they file the fake return, the fraudster will enter false deductions to get a large refund. Then, they supply their bank account information to have the refund deposited. If you're a victim of tax-related identity theft, you can report the issue to the IRS by filling out an affidavit. You may also need to file a police report in your local area. Filing your taxes early can reduce the risk of tax-related identity theft.

Taxes

Taxes are mandatory payments you make to a government. In the U.S., citizens and non-citizens alike must pay federal income tax equal to a percentage of taxable income (such as money earned through working for an employer). Employees must also pay payroll taxes to fund government programs like Social Security and Medicare. Some states and local governments assess income tax and other taxes, such as sales tax.

Term

In business and finance, the word term has two meanings. The first is an agreement or principle. You’ll often see the word in the phrase “terms and conditions,” which describes a service provider's promises to their customers. Term can also mean the length of time payments will be made. With installment loans, the term is the number of months you pay the lender.

Term loan

A term loan is when you borrow money and promise to repay it within a given amount of time. You receive all the money upfront and make regular payments throughout the term. Once you pay off the loan, you’ll need to take out another loan if you need to borrow money again. Installment loans like personal loans, auto loans, and mortgages are examples of term loans.

Tip

In personal finance terms, a tip is the amount of money you give someone for performing a service. For example, it’s customary to give restaurant servers a tip equal to 15% to 20% of the total bill for excellent service in the United States. Other jobs that often receive tips in the U.S. include bartenders, valets, hairstylists, masseuses, and taxi drivers.

Tip income

Tip income is money a person receives directly from customers in exchange for good service. It includes both cash and tips added to credit and debit cards. The IRS considers tip income regular income, so you must report it and pay income taxes. Most employers require employees to tell them how much they make in tips, so they can add it to the Form W-2, Wage, and Tax Statement for reporting income tax owed.

Transaction fee

A transaction fee is money paid for completing a purchase or financial transaction. Businesses pay transaction fees on every credit card purchase their customers make, and financial institutions often require brokerage account holders to pay transaction fees when they make trades. A transaction fee for using a debit or credit card in another country may also occur.

Transfer fee

A transfer fee is the money you pay to make a transfer. The fee helps to cover the cost of the money transfer provider. How much you can expect to pay depends on where you’re sending the money, how much money you’re sending, and how quickly you want the transfer to arrive. When choosing a money transfer service, look for one that fully discloses the fees upfront so you know how much you’re paying to send money to loved ones.

Transfer speed

Transfer speed is the time it takes for a money transfer to reach the recipient. An instant transfer arrives within a few seconds or minutes after you make the transfer. Depending on where you’re sending money and how much you need to send, the transfer speed may be a few hours or days.

Top Finance Terms You Should Know

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529 plan

529 prepaid tuition plan

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