Banking, Credit, and Debt Glossary

The process of spreading a loan into a series of fixed payments over time, with each payment covering both interest and principal.

The annualized cost of borrowing money, including interest and fees, expressed as a percentage for standardized comparison.

The effective annual rate of return on a deposit account, accounting for the effect of compounding interest.

Moving debt from one credit card to another, typically to take advantage of a lower introductory interest rate.

A time deposit offered by banks with a fixed term and fixed interest rate, typically paying higher rates than savings accounts.

A deposit account at a financial institution allowing frequent deposits and withdrawals for daily transactions.

An asset pledged by a borrower to secure a loan, which the lender can seize if the borrower fails to repay.

Interest calculated on both the initial principal and the accumulated interest from previous periods.

An agency (Equifax, Experian, TransUnion) that collects and maintains credit information used to generate credit reports and scores.

A detailed record of an individual credit history, including accounts, payment history, inquiries, and public records.

A numerical rating (300-850 on the FICO scale) representing creditworthiness based on credit history and behavior.

The ratio of current credit card balances to total available credit limits, expressed as a percentage.

A repayment strategy targeting the highest-interest-rate debt first to minimize total interest paid.

A repayment strategy targeting the smallest balance first for psychological momentum, regardless of interest rate.

The percentage of gross monthly income that goes toward paying monthly debt obligations.

Failure to repay a loan according to the agreed terms, which severely damages credit scores and may result in legal action or asset seizure.

Federal Deposit Insurance Corporation coverage protecting bank deposits up to 50,000 per depositor per insured bank.

An interest rate that remains constant for the entire term of a loan or deposit.

The window between a credit card billing cycle close and the payment due date during which no interest accrues if the balance is paid in full.

The smallest amount a credit card holder must pay each billing cycle to keep the account in good standing, typically 1-3%% of the balance.

A deposit account offering higher interest rates than regular savings with limited check-writing privileges.

The original amount of money borrowed or deposited, before interest or returns.

A deposit account at a financial institution designed for accumulating money, earning interest, with some withdrawal limitations.

Interest calculated only on the original principal amount, not on accumulated interest.

An interest rate that changes periodically based on an underlying benchmark or index rate.