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Lessons 13, 15, 16

Terms in this set (21)

Compound interest
Interest computed on the sum of the principal and earned income
Simple interest
Interest earned on the principal and paid out to a depositor
Compounding
The practice of leaving interest earned "on deposit" so it too earns interest.
Principal
The amount deposited in savings without including interest earned.
Interest
The price paid for using someone else's money.
Interest rate
The price paid for using someone else's money, expressed as a percentage.
Rule of 72
A formula that can be used to calculate how long it takes for invested money to double.
Annual fee
The yearly charge for having a credit card.
Opportunity cost
The next-best alternative that is given up when a choice is made.
Annual Percentage Rate (APR)
The total cost of credit for one year, expressed as a percentage. The APR includes interest and other fees associated with the loan.
Minimum payment
The lowest amount you must pay toward your credit balance each month.
Credit limit
The maximum amount of credit extended to you by a bank or credit card issuer.
Late fee
A penalty, in addition to interest, that is charged if payment is received after the due date.
Finance charge
The total dollar amount you must pay for the credit you use.
Grace period
A period of time during which you are not charge interest on new purchases (if you have no outstanding balance).
Inflation
A general increase in prices.
Collateral
Property or other valuables used as security to guarantee the repayment of a loan. The lender can claim collateral if the borrower fails to repay.
Debt to income ratio
A measurement of how much of your income is being spent on debt.
Credit bureau
A firm that collects borrowers' credit histories.
Credit score
A score used to evaluate a borrower's credit worthiness and likelihood to repay a loan.
Credit report
A history of a borrower's use of credit. You should get a copy of your credit report once a year to ensure there are no mistakes.
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