Finance Glossary

An account number is a unique number assigned to your bank account or financial account. It helps identify your specific account when sending or receiving money.

ACH stands for Automated Clearing House. It’s an electronic network used to move money between bank accounts in the U.S., often for direct deposit, bill payments, and bank transfers.

Annual Percentage Rate (abbreviated APR) is the yearly cost of borrowing money, including interest and certain fees, expressed as a percentage.

Annual Percentage Yield (abbreviated APY) is how much interest an account earns in a year. It includes the effect of compounding.

An authorized user is someone who is added to another person’s credit card account and can use the card to make purchases. The primary account holder is typically responsible for payments.

A billing cycle is the period of time between one statement closing date and the next. Purchases, payments, fees, and interest during that period are summarized on your statement.

Blockchain technology is a system for recording data in linked blocks that form a shared, continuously updated ledger, maintained and verified by a network of computers.

A brokerage account is a type of financial account that lets you buy and sell investments like stocks, bonds, mutual funds, and ETFs. These accounts are typically offered by licensed brokerage firms and are not bank accounts or FDIC-insured, though they are subject to SIPC protections.

A CD or certificate of deposit is a savings product that locks in money for a fixed period. They usually offer higher interest than regular savings accounts.

Compounding interest is when interest is calculated on both your original amount and any interest already earned or charged. Over time, this can help your savings grow faster or increase the total cost of debt.

A credit bureau is a company that collects credit information and creates credit reports. Lenders may use these reports to help evaluate applications for credit.

A credit freeze is when you restrict access to your credit report to help prevent new accounts from being opened in your name. You can lift or remove the freeze at any time when you need to apply for credit.

A credit history is a summary of how you’ve used and repaid credit over time. It includes factors like payment behavior, account types, and length of credit, and may impact your credit score.

Credit limit is the maximum amount you can borrow on a credit card. Exceeding it may result in declined transactions or fees.

A credit report is a record of your credit activity, including accounts, payment history, and inquiries. Credit reports are maintained by credit bureaus and used by lenders to evaluate applications.

A credit scoring model is a formula used to calculate a credit score based on information in your credit report. Different models may weigh factors like payment history, credit utilization, credit age, credit mix, and recent credit applications differently.

Credit utilization is the percentage of your available credit that you’re using. For example, if you have a $1,000 credit limit and a $300 balance, your credit utilization is 30%. 

Cryptocurrency, often called crypto, is a digital asset that exists only in electronic form and runs on blockchain networks—decentralized non-bank systems that record and verify transactions across a network of distributed computers.

Diversification is an investment strategy that involves spreading your money across different types of assets, such as stocks, bonds, or funds, to help reduce risk. It does not guarantee a profit or protect against loss.

Earnings per share (EPS) is a measure of a company’s profit divided by the number of outstanding shares. It’s commonly used to help evaluate a company’s financial performance.

An ETF is a type of investment fund that holds a collection of assets, such as stocks or bonds, and trades on an exchange like a stock. ETF prices can change throughout the trading day.

Fiat currency, like the U.S. dollar, operates within traditional banking and payment systems, making it widely usable but sometimes limited by processing times and bank hours.

A fractional share is a portion of a single share of a stock or ETF. It allows you to invest in securities without needing to buy a full share, which can make higher-priced investments more accessible.

A hard credit check is when a lender reviews your credit report as part of a credit application, such as for a loan or credit card. This type of inquiry may impact your credit score.

An index fund is an investment fund designed to track the performance of a specific market index, such as the S&P 500. These funds are typically passively managed and may have lower fees than actively managed funds.

An installment is a loan that is repaid over time with a set number of scheduled payments, usually monthly. Each payment typically includes both principal and interest.

An interest rate is the percentage charged for borrowing money or earned on savings, usually expressed on an annual basis. Your actual rate may vary depending on the product and your financial profile.

An IRA is a tax-advantaged retirement account that individuals can use to save and invest for retirement. Contributions and withdrawals may be subject to specific tax rules and eligibility requirements.

A mutual fund is an investment that pools money from many investors to buy a diversified portfolio of stocks, bonds, or other assets. Professional fund managers make the investment decisions for the fund.

A minimum payment is the smallest amount you must pay by your due date to keep your account in good standing. Paying only the minimum may lead to interest charges and may take longer to pay off your balance.

P/E ratio is the price-to-earnings ratio, a metric that compares a company’s current share price to its earnings per share (EPS) to help investors evaluate how expensive or cheap a stock may be relative to its profitability.

The prime rate is an interest rate that banks use as a benchmark for setting rates on loans and credit products. Your actual rate may be higher depending on factors like your credit profile.

Revolving credit is a type of credit that lets you borrow up to a set limit, repay some or all of what you owe, and borrow again. Credit cards are a common example.

A robo-advisor is a digital platform that uses algorithms to provide automated investment management services, often based on your financial goals and risk tolerance, with limited human involvement.

A Roth IRA is a type of IRA funded with after-tax contributions. Qualified withdrawals, including earnings, may be tax-free if certain conditions are met.

A routing number is a nine-digit number that identifies a bank or financial institution in the U.S. It’s often used for direct deposit, bill pay, wire transfers, and ACH transfers.

A review of your credit that does not affect your credit score. Soft checks may be used for prequalification or account monitoring.

Stablecoins are a type of digital asset designed to maintain a stable value, often by being tied to a reference asset like a fiat currency. They may carry risks, including changes in value, regulatory uncertainty, and how reserves are managed.

A tax-advantaged account is a type of account that offers certain tax benefits, such as tax-deferred growth or tax-free withdrawals, depending on the account type and applicable rules.

Volatility is a measure of how much and how quickly the price of an asset rises or falls over time, indicating the level of risk or uncertainty in its value.