Financial glossary

A 401(k) is an employer-sponsored defined contribution retirement plan that lets eligible workers defer pay into investments under tax-advantaged rules.

The 50/30/20 rule is a flexible budgeting guideline that divides take-home pay among needs, wants, and saving or debt goals.

An ACH transfer is an electronic credit or debit sent between U.S. bank or credit-union accounts through the Automated Clearing House network under standardized authorization, settlement, and return rules.

Annual percentage rate, or APR, is a standardized yearly measure of the cost of consumer credit, calculated under rules that vary by credit product and can include more than the stated interest rate.

Annual percentage yield, or APY, is the percentage amount a deposit account would earn over a 365-day period under the disclosure assumptions, including the effect of compounding.

Amortization is the process of repaying a loan through scheduled payments that cover accrued interest and reduce principal over time, typically bringing the balance to zero by the end of the stated term.

An annual fee is a periodic charge for keeping a credit or charge card account available, disclosed by the issuer and economically justified only when usable incremental benefits exceed the fee and alternatives.

A balance transfer moves eligible debt to another credit-card account, commonly under a temporary promotional APR, while any transfer fee and remaining debt continue to require repayment.

Bitcoin is a peer-to-peer electronic asset and payment network whose public transaction history is secured by proof-of-work, with ownership controlled through cryptographic keys and supply governed by protocol rules.

A blockchain is a shared digital ledger whose records are grouped and cryptographically linked so participating computers can agree on an ordered, tamper-evident history under a defined consensus protocol.

A bond is a debt security through which an investor lends money to an issuer in exchange for contractual payments and repayment terms, subject to credit and other risks.

Budgeting is the process of turning expected income and expenses into a written plan, then comparing that plan with actual cash flow.

The Consumer Price Index (CPI) measures the average change over time in prices paid by urban consumers for a representative basket of goods and services.

A capital gain is the taxable profit generally created when a capital asset is sold for more than its adjusted tax basis.

Capital gains tax is the federal and potentially state tax resulting from net taxable gains after basis, holding period, losses, income, and special rules are applied.

Cash back is a credit-card reward measured as a share of eligible purchases and redeemable under program terms, commonly as a statement credit, deposit, check, or equivalent points value.

A certificate of deposit is a bank or credit-union deposit with a stated maturity, rate or APY, and withdrawal terms, commonly including a penalty for taking principal out before maturity.

A checking account is a transaction deposit account built for receiving money and making frequent payments through methods such as debit cards, checks, ACH, bill pay, cash, and transfers.

Coinsurance is the percentage of an insurer’s allowed amount that a member pays for a covered health service, usually after satisfying the applicable deductible.

A cold wallet is a cryptocurrency key-management arrangement that keeps private keys offline or isolated from internet-connected systems, reducing remote attack exposure while placing more responsibility on physical security, backups, and recovery procedures.

Compound interest is interest calculated on the original principal plus interest already credited, so the balance used for the next calculation can grow over time.

A copayment, or copay, is a fixed dollar amount a health plan member pays for a covered service or prescription under the plan’s cost-sharing rules.

A cosigner is a person who signs another borrower’s credit agreement and becomes legally responsible for repayment, generally without receiving ownership of the property or proceeds financed by the loan.

A credit limit is the maximum revolving balance an issuer currently authorizes on a credit card or line of credit, subject to the account agreement, available-credit calculation, and issuer controls.

A credit score is a numerical estimate of the likelihood that a consumer will repay credit as agreed, calculated from information in a credit report using a specific scoring model and version.

Credit utilization is the share of available revolving credit represented by reported balances, measured for each account and across accounts; lower utilization generally indicates less reliance on credit limits.

Decentralized finance, or DeFi, is a category of blockchain applications that use smart contracts and crypto assets to provide trading, lending, payments, and related financial functions with reduced reliance on traditional intermediaries.

Debt-to-income ratio, or DTI, is the percentage of gross monthly income committed to recurring monthly debt payments and is one measure lenders use to evaluate repayment capacity.

An insurance deductible is the amount a policyholder must pay toward a covered loss or service before the insurer begins paying under the policy’s terms.

Loan default is the failure to meet a material obligation in a credit agreement, commonly after missed payments reach the contract or program’s specified threshold, allowing the creditor to exercise collection or collateral remedies.

A dividend is a distribution of cash, shares, or other property from a corporation or pooled investment to eligible owners, commonly declared from earnings but not guaranteed.

Dividend yield is annual dividends per share divided by the current share price, expressed as a percentage; it is a changing income snapshot, not a guaranteed return.

The Dow Jones Industrial Average, or DJIA, is a price-weighted index of 30 prominent U.S. companies maintained by S&P Dow Jones Indices.

A down payment is the portion of a purchase price paid upfront from the buyer’s eligible funds rather than financed, reducing the loan amount and establishing initial equity in the asset.

An exchange-traded fund, or ETF, is a pooled investment vehicle whose shares trade on an exchange at market prices while the fund owns a portfolio defined by its prospectus.

Earnings per share, or EPS, expresses the portion of a company's profit attributable to each weighted-average common share, making total earnings easier to compare on a per-share basis.

An emergency fund is a liquid cash reserve kept for unplanned, necessary expenses or a temporary loss of income.

Ethereum is a public programmable blockchain whose nodes execute transactions and smart contracts in a shared virtual machine, using ether for fees and proof-of-stake for consensus.

An expense ratio is a fund’s annual operating expenses expressed as a percentage of its average net assets, deducted within the portfolio rather than usually billed as a separate investor invoice.

FDIC insurance is U.S. government-backed protection for eligible deposits at an insured bank, generally up to $250,000 per depositor, per insured bank, for each ownership category.

A FICO Score is a credit-risk score created by FICO from information in a consumer credit report; lenders can use different FICO model versions and bureau files for different products.

A foreign transaction fee is a card-issuer charge on a transaction involving foreign currency, an overseas location, or a foreign merchant as defined in the card’s disclosures, commonly calculated as a percentage.

A gas fee is the amount paid for computational work and data required by a blockchain transaction; on Ethereum it equals gas used multiplied by the effective price per gas and is paid in ether even when another token is transferred.

A high-yield savings account is an interest-bearing deposit account marketed with an APY that is materially more competitive than many standard savings accounts, usually with a variable rate.

A hot wallet is software that manages cryptocurrency keys on an internet-connected device, making transactions and blockchain applications convenient while exposing the wallet to more persistent device, browser, phishing, and application risk.

An index fund is a mutual fund, ETF, or unit investment trust designed to track the performance of a specified market index before fees and implementation differences.

Inflation is a sustained increase in the general price level that reduces what each dollar can buy; it is commonly measured as a change in a price index.

An interest rate is the percentage price charged for borrowing principal, or paid for the use of deposited funds, over a stated period; it does not necessarily include every fee or reflect the loan’s total cost.

Liability coverage helps pay covered claims when an insured is legally responsible for injury to another person or damage to another person’s property.

A marginal tax rate is the rate applied to the next dollar of taxable income within a progressive tax schedule.

Market capitalization, usually shortened to market cap, is the market value of a company's outstanding equity, calculated by multiplying a share price by the corresponding number of outstanding shares.

A mortgage is a loan secured by real property in which the borrower promises repayment and grants the lender a lien that can be enforced through foreclosure if contractual obligations are not met.

A mutual fund is an SEC-registered open-end investment company that pools money from investors in a portfolio and generally issues and redeems shares at the next calculated net asset value.

Nasdaq can refer to the Nasdaq Stock Market, the Nasdaq Composite Index, or Nasdaq as a company; in market-index discussions it commonly means the market-cap-weighted Nasdaq Composite of Nasdaq-listed securities.

Net worth is the current value of everything a person or household owns minus the balances of everything owed.

An overdraft occurs when a bank or credit union pays a transaction even though the checking account lacks enough available funds, potentially creating a negative balance and a fee.

The price-to-earnings ratio, or P/E ratio, compares a company's share price with its earnings per share to show how much investors are paying for each dollar of reported earnings.

Private mortgage insurance, or PMI, is lender-arranged insurance commonly required on a conventional mortgage with a high loan-to-value ratio; the borrower pays the cost, but coverage protects the lender against part of a default loss.

An insurance premium is the price charged for coverage during a stated period; it is generally owed whether or not the policyholder files a claim.

Principal is the amount of money borrowed or invested before interest, gains, and most fees; on a loan, outstanding principal is the balance on which interest is commonly calculated and that payments gradually reduce.

Refinancing replaces an existing debt with a new loan, usually to change rate, payment, term, borrowers, or cash received; it requires new underwriting and can create new fees, interest, and collateral risk.

Rewards points are units issued under a credit-card loyalty program for eligible activity and redeemable through program-defined options whose value, availability, and rules can vary.

A Roth IRA is an individual retirement account funded with after-tax money whose qualified distributions of contributions and earnings are federally tax-free.

A routing number is a nine-digit U.S. identifier assigned under the ABA system to identify a financial institution or processing endpoint for checks, ACH payments, and certain wire transfers.

The S&P 500 is a rules-governed U.S. large-cap equity index maintained by S&P Dow Jones Indices and weighted by float-adjusted market capitalization.

SIPC protection helps return cash and securities missing from customer accounts when an SIPC-member brokerage fails, generally up to $500,000 per separate capacity, including a $250,000 limit for cash.

A savings account is a deposit account designed to hold money, earn interest, and provide more limited transaction access than a checking account under the institution’s terms.

Simple interest is interest calculated only on a stated principal amount rather than on principal plus previously accumulated interest.

A smart contract is code deployed to a blockchain address that stores state and executes defined functions when called by a valid transaction or another contract under the network’s rules.

A stablecoin is a blockchain-based digital asset designed to track a reference value, commonly one U.S. dollar, through reserves, redemption rights, collateral, market incentives, or a combination of those mechanisms.

Staking is the commitment or delegation of eligible crypto assets under a proof-of-stake protocol so validators can participate in consensus and potentially receive variable protocol rewards while bearing operational and asset risk.

The standard deduction is a filing-status-based amount that generally reduces income subject to federal income tax when a taxpayer does not itemize deductions.

A stock is an equity security representing an ownership interest in a corporation, with economic and voting rights that depend on the share class and the company's governing documents.

A tax bracket is a range of taxable income to which one rate applies within a progressive income-tax schedule.

A traditional IRA is an individual retirement account whose contributions may be deductible and whose untaxed amounts are generally taxable when withdrawn.

Transfer partners are participating airline, hotel, or other loyalty programs into which an eligible cardholder can convert issuer rewards at a published ratio under both programs’ current rules.

A U.S. Treasury bond is a marketable federal debt security with an original term of 20 or 30 years, a fixed rate set at auction, semiannual interest payments, and principal due at maturity.

Form W-2 is the annual wage and tax statement an employer provides to an employee and files with the Social Security Administration.

A wire transfer is an electronic bank-to-bank payment instruction designed to move funds with speed and strong settlement finality, usually for a fee and with limited ability to reverse errors.

Yield is a return measure that relates income or expected cash flows to an investment's price or value over a stated period and under stated assumptions.