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Financial Literacy Flashcards

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1
Q

What is Amortization?

A

The process by which loan payments are applied to the principal and interest on a loan according to a set schedule.

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2
Q

What is an Annual Fee?

A

The amount that credit card companies charge for the use of a credit card.

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3
Q

What does Annual Percentage Rate (APR) mean?

A

The finance charge or total amount it costs per year to use credit, calculated as a percentage of the amount borrowed, including interest, transaction fees, and service charges.

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4
Q

What is Annual Percentage Yield (APY)?

A

The actual interest rate an account pays per year with compounding included; calculated the same way by all banks/credit unions.

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5
Q

What is Appreciation?

A

A rise in value or price.

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6
Q

What are Assets?

A

What a person owns, such as cash, stocks, bonds, real estate, and personal possessions.

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7
Q

What is an Automated Teller Machine (ATM)?

A

An electronic machine that bank customers and credit union members can use to withdraw cash and make financial transactions.

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8
Q

What is a back-end load?

A

A sales charge paid when investments are sold.

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9
Q

What is bait and switch?

A

An illegal sales technique in which sellers advertise a product with the intention of persuading customers to buy a more expensive product.

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10
Q

What is a bank?

A

A for-profit company that is owned by its stockholders and provides saving and checking accounts and other financial services to its customers.

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11
Q

What is bankruptcy?

A

Legal process for selling most of the debtor’s property to help satisfy debts that can’t be repaid, in exchange for (a) relieving debtors of the responsibility of paying their financial obligations or (b) protecting them while a plan is created and they try to repay debts.

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12
Q

What is a bond?

A

A formal agreement where you lend money to a borrower who can then use that money for a set period of time. In exchange, you as the lender will get paid a specific amount of interest.

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13
Q

Who is a borrower?

A

An individual, business, or government that has received and used something belonging to somebody else, with the intention of returning or repaying it - often with interest in the case of borrowed money.

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14
Q

What is a Budget?

A

A plan for managing money, dividing up expected income and expenses among spending and saving options based on personal goals during a given time period.

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15
Q

What does Capacity refer to in credit scoring?

A

Ability to repay a loan from present income; one of three factors in credit scoring.

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16
Q

What is Capital?

A

The value of personal items that one owns, including savings, investments, and property; one of three factors used in credit scoring.

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17
Q

What is a Capital Gain?

A

The difference between the purchase price and the selling price when an investor buys a stock and later sells it at a higher price.

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18
Q

What is a Capital Loss?

A

The difference when an investor ends up selling a stock at a lower price than the purchase price.

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19
Q

What is Cash Flow?

A

Movement of the money you receive and the money you spend.

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20
Q

What is a Certificate of Deposit (CD)?

A

A certificate issued by a bank to a person depositing money in an account for a specified period of time. A penalty is charged for early withdrawal from most CD accounts.

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21
Q

What does ‘Character’ refer to in credit scoring?

A

Character refers to trustworthiness and indicates a responsible attitude towards living up to agreements.

Paying bills on time shows financial responsibility.

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22
Q

What is a ‘Check’?

A

A check is a written order directing a bank or credit union to pay a person or business a specific sum of money.

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23
Q

What is a ‘Checking Account’?

A

A checking account is a bank or credit union account that allows withdrawals by writing a check.

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24
Q

What is ‘Compound interest’?

A

Compound interest is a situation in which interest is earned on previously earned interest, causing earnings to accumulate more rapidly over time.

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25
What is the 'Rule of 72'?
The Rule of 72 is a method to determine how long it takes money to double in value by dividing 72 by the interest rate.
26
Who are 'Consumer advocates'?
Consumer advocates are individuals or groups that actively promote consumer interest in areas such as health and safety, education, and fairness in the marketplace.
27
What is cost/benefit analysis?
A tool used to choose among alternatives by weighing the cost of a product or service against the benefit it will provide.
28
What is a coverage limit?
The maximum amount an insurance company will pay if you file a claim.
29
What is credit?
The amount of money a creditor is willing to loan another to purchase goods and services, based on trust and the expectation that the money will be repaid as promised with interest.
30
What is a credit card?
A card that enables the holder to charge expenses for purchases or to get money, often with interest; synonymous with 'buy now, pay later.'
31
What is a credit limit?
The maximum amount of credit a lender will extend to a customer.
32
What is creditworthiness?
A measure of one's ability and willingness to repay a loan.
33
What is a credit rating/score?
A measure of creditworthiness based on an analysis of the consumer's financial history, often computed as a numerical score, using the FICO or other scoring systems to analyze the consumer's credit. ## Footnote It evaluates a person's willingness and ability to pay debts as judged by character, capacity, and capital.
34
What is a credit report?
A written record collected by a credit agency that tracks a borrower's credit payments, whether or not these payments are made on a timely basis, and how long the borrower has had various credit accounts.
35
What is a credit union?
A financial institution owned by its members that provides savings and checking accounts and other services to its membership at low fees.
36
What is a debit card?
A card used to pay for goods and services directly from a checking account by transferring funds electronically from one's checking account to the store's account to pay for a purchase; also called check cards.
37
What is debt?
The entire amount of money owed to lenders.
38
What is a Deductible?
The amount of a loss you must pay out of your own pocket before the insurance company will step in and pay the rest.
39
What is Delayed Gratification?
The willingness to give up something you want now in order to get something better in the future.
40
What is Depreciation?
Decline in a product's value that starts the moment a product is purchased (car).
41
What is Diversification?
Distributing funds among different types of investments to minimize overall risk.
42
What is a Dividend?
The portion of the profits paid to the shareholders of a company.
43
What is Dollar Cost Averaging?
The practice of investing a fixed amount into the same investment at regular intervals, regardless of what the stock market is doing.
44
What is Earned Interest?
The payment you receive for allowing a financial institution or corporation to use your money.
45
What are Employee benefits?
Additional benefits, beyond a paycheck, offered by employers (e.g., health insurance or pension plan).
46
What does it mean to endorse a check?
To sign the back of a check to make it payable to the specified payee.
47
What is an expense?
An amount of money spent to buy something or do something.
48
What is personal financial planning?
The process of (a) setting goals, (b) developing a plan to achieve them, and (c) putting the plan into action.
49
What does financial planning involve?
An ongoing thinking process to develop an orderly program or blueprint for handling all aspects of one's money, including spending, credit, saving, and investing.
50
What is a FICO Score?
A mathematical model that assesses a person's reliability in repaying borrowed funds.
51
What are finance charges?
The interest paid on unpaid credit balances.
52
What are financial institutions?
Intermediaries that help channel funds from savers to borrowers.
53
What is financial literacy?
Basic financial knowledge, including an understanding of banks and the banking system, financial markets, credit and credit cards, and tax laws, as well as the ability to apply this knowledge in making decisions on how to spend, earn, or save money today to build wealth for tomorrow.
54
What are Fixed Expenses?
Expenses that cost the same amount every time.
55
What is Fraud?
Intentional misrepresentation of information with the intent to deceive or mislead.
56
What is a Front-end load?
A sales charge paid when investments are purchased and sometimes when dividends are reinvested.
57
What is a Grace Period?
On a credit card, the length of time you have before you start accumulating interest on an unpaid balance.
58
What is Gross Income?
The total amount of income from wages before any payroll deductions.
59
What is High balling?
An excessively high offer for a trade-in vehicle.
60
What is Identity Theft?
When someone uses your name, Social Security number, credit card number, and other personal information without your permission.
61
What is an Implied warranty?
Unwritten guarantee that a product is of sufficient quality to fulfill the purpose for which it was designed.
62
What is an impulse purchase?
A purchase made on whim, without using a decision making process.
63
What is income?
Any money an individual receives.
64
What is information processing?
Analyzing and organizing information for decision making.
65
What is insurance?
A risk management tool that limits financial loss due to illness, injury, or damage in exchange for its promise of protection and help.
66
What is an insurance premium?
The payment a person makes to an insurance company in exchange for its promise of protection and help.
67
What is an installment plan?
A closed-end loan for a specific product such as furniture or appliances.
68
What is interest?
Payment for use of someone else's money; usually expressed as an annual rate in terms of a percent of the principal (the amount owed).
69
What is an investment?
Setting aside money for future income, benefit, or profit to meet long-term goals; using savings to earn a financial return.
70
What is a late fee?
A penalty on all types of credit for making a payment after its due date.
71
What is a Lender?
One who lends; may be an individual, a business, or a government.
72
What are Liabilities?
Amount a person owes, such as unpaid bills, credit card charges, personal loans, and taxes.
73
What is Liquidity?
The ease with which an asset can be converted to cash without serious loss.
74
What are Loan sharks?
Unlicensed lenders who charge illegally high interest rates.
75
What is a Loan Term?
The length of time you have to pay off a loan.
76
What is a Minimum payment?
The smallest amount a person is required to pay in a given month on an open-ended credit account.
77
What is a Money market account?
An interest-bearing account that offers limited check-writing privileges. Deposits may be added at any time; some money market accounts limit the withdrawals depositors may make without paying a penalty. Money market accounts are low-risk investments that serve as a cross between saving and checking accounts. ## Footnote Money market accounts offered within the banking system are known as money market deposit accounts. Money market accounts offered by mutual funds are known as money market mutual funds.
78
What is a money order?
A form of payment that a person can buy for a specific amount and sign over to the person or firm named on the money order. People must pay a fee to obtain a money order. A money order cannot bounce because full payment is needed before the money order is issued.
79
What is a mortgage?
A loan to buy real estate, such as land or a home.
80
What is a mutual fund?
An investment security that is actually a diversified portfolio of equities, bonds, or other securities. Investors purchase shares and can sell them at any time.
81
What is net income?
Also called 'take-home pay'; it's the amount of income left after payroll deductions.
82
What is net worth?
The difference between a person's assets and liabilities.
83
What is open-ended credit?
A form of credit that allows a person to borrow funds to make purchases for which there is no predetermined repayment period.
84
What is Opportunity Cost?
Opportunity Cost is the cost of something expressed in terms of what had to be given up to obtain it. It involves weighing alternatives rather than merely considering the cash price or value of a specific good or service.
85
What is an Origination Fee?
An Origination Fee is a charge for setting up a loan that is typically associated with home loans.
86
What are Payroll Deductions?
Payroll Deductions are amounts subtracted from gross income that are withheld by an employer for items such as taxes and employee benefits.
87
What does Pay Yourself First (PYF) mean?
Pay Yourself First (PYF) refers to disciplined saving or setting aside money as a regular part of the budget for later spending or investing.
88
What is a Personal Identification Number (PIN)?
A Personal Identification Number (PIN) is the unique pass code number you use to get access to your savings and/or checking account.
89
What is Philanthropy?
Philanthropy is a personal or corporate interest in helping others, especially through gifts to charities or endowments to institutions.
90
What is phishing?
An identity theft tool that appears in the form of an E-mail or pop-up message; usually looks like it's from a legitimate financial institution and prompts you to provide your personal information in order to fix a 'problem' with your account.
91
What are points in mortgage lending?
A one-time service charge by mortgage lenders at closing to increase the return on the loan; each point is one percent of the amount of the principal.
92
What is predatory lending?
Lending practices which promise loans that are 'too good to be true' and pressure borrowers to take loans on the spot. Lending practices include a variety of financial abuses such as excessive fees, penalties for early pay-off of the loan, balloon payments, loan flipping, high interest rates, monthly payments the borrower can't afford, and unauthorized refinancing of loans. ## Footnote Examples of the practice include predatory mortgages, payday loans, overdraft loans, excessive credit card debt, and instant tax refund loans.
93
What is profit?
The difference between the costs required to create a product or supply a service that can be bought with it.
94
Principal
The amount of money someone is willing to loan you. Also, the amount that is still owed on a loan.
95
Resources
Human resources are those resources people have within themselves, such as working knowledge, skill, mental effort, motivation, energy. Non-human or external resources include money, time, and equipment.
96
Rate of Return
How fast money in savings account or investment grows
97
Return
earnings from an investment, usually expressed as an annual percentage rate
98
Reverse mortgage
An arrangement in which a homeowner borrows against the equity in his/her home and receives regular monthly tax-free payments from the lender. Also called reverse-annuity mortgage or home equity conversion mortgage.
99
Revolving credit
an open-ended account with a limit to how much can be borrowed but no time limit for repayment
100
Risk management
Deliberately and systematically using various strategies for controlling against potential personal or financial loss from pure risks.
101
Risk tolerance
The amount of uncertainty or possibility of loss the individual can bear
102
Savings
Money set aside for short-term goals.
103
Savings account
An account you have at a financial institution that helps you accumulate and save money and earn interest at the same time.
104
Share account
The credit union term for a savings account.
105
Share draft account
The credit union term for a checking account
106
Social security
The federal government’s basic program for providing income when earnings are reduced or stopped because of retirement, or disability. Income is also provided to families when the working parent(s) dies and underage children are a part of the family.
107
Spending
using income for current consumption
108
Stock
An investment that makes the investor a part owner of a company
109
Stock market
The place where stocks are bought and sold
110
Taxes
A compulsory payment by individual/organizations to the government; fees placed on income, property, or goods to support government programs.
111
Time value of money
The relationship between time, money, and rate of return (interest), and their effect on earnings growth. The more time, money, and rate of interest, the more money yielded at the end of a period of time.
112
Traveler's check
a form of check that can be used to obtain cash; the buyer of the traveler's check pays a specific dollar amount to acquire these checks, which are issued in standardized packets by a traveler's check issuer. The checks are written to a person or firm and signed by the person writing the check. Often these come with protection against loss or theft. Traveler's check issuers usually charge a fee when they sell these instruments.
113
Variable expenses
Expenses that are not fixed.
114
Wants
Items that a person would like to have but are not essential for life. Items, activities, or services that may increase the quality of life, but one can live without them
115
Wealth building
Increasing the total value of what one owns; one’s tangible assets using strategies to increase savings and personal asset accumulation, thereby promoting individual/family economic well-being and financial security.
116
Withholding
Employer deductions from employees’ earnings to pay employees’ taxes.
117
Yield
The profit from an investment

Financial Literacy (1 decks)

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