Finance dictionary
Budgeting, credit and paycheck terms explained in plain English. 40 terms and growing.
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A
- AmortizationPaying off a loan in equal payments, where each payment covers that month's interest first and the rest goes to the balance.
- APR (annual percentage rate)The yearly cost of borrowing money, shown as a percentage.
- APY (annual percentage yield)What a savings account really earns in a year, including interest earned on interest.
B
- Balance transferMoving debt from one credit card to another, usually to get a low or 0% introductory rate.
- Bi-weekly payBeing paid every two weeks, which adds up to 26 paychecks a year.
- Bonus paycheckAn extra paycheck in a month: the third when you're paid every two weeks, or the fifth when you're paid weekly.
- BudgetA plan for how you'll use the money you expect to get.
C
- Cash flowMoney coming in compared with money going out over a period of time.
- Compound interestInterest charged or earned on earlier interest, not just on the original amount.
- Credit reportA record of your credit accounts and payment history, kept by the credit bureaus.
- Credit scoreA number, usually from 300 to 850, that tells lenders how likely you are to repay.
- Credit utilizationHow much of your available credit card limit you're using, as a percentage.
D
- Debt avalanchePaying off debts from the highest interest rate to the lowest, which saves the most money.
- Debt consolidationCombining several debts into one, ideally with a lower interest rate.
- Debt snowballPaying off debts from the smallest balance to the largest, for quick wins.
- Debt-to-income ratio (DTI)Your monthly debt payments divided by your monthly income before taxes.
- Discretionary spendingSpending on wants rather than needs, like eating out or entertainment.