Accounts
What is one benefit of a savings account?
1. gaining interest on money sitting in your account
2. Security in not being attached to a debit card
Define Grace Period
The time between when you spend money using the credit card and when the company charges you interest.
What is the difference between a fixed rate and a variable rate for interest on a loan?
Fixed Rate: has the same interest rate for the entirety of the borrowing period
Variable Rate: have an interest rate that changes over time depending on the market.
When becoming an authorized user, who is liable for overdrafts or defaults on the account?
a) just the other person
b) just you
c) both people
A) Just the other person
That's why its so important to take their trust seriously! It may build your credit, but they are on the line if you default on payments or overdraft on their line of credit.
What is a Pension?
A benefit plan where an employe is provided income after they stop working, often paid out as regular payments for life. Calculated based on tenure, income, and estimated costs of living at the time of claim.
What is one benefit of a Checking Account?
Give us easy access to our money
Write and cash checks and receive direct deposit
Allow us to transfer money easily
Allow us to use debit card
What is the range a credit score can fall in?
Credit scores range from 300-850
What is Credit Utilization? What percentage do you want to stay under?
The percentage of your credit you are using - it is recommended to stay under 30%
The details of any loan will include which THREE things.
The principle, the interest rate, the loan term
What is a 401k?
a retirement savings plan sponsored by employers that allows employees to contribute a portion of their wages to individual accounts. Sometimes matched by employers.
What is a secured loan? How is it unique?
It is backed with collateral that may be collected by the bank if you default on your loan, so it is safer for the lender.
What is the difference between Credit Reports and Credit Scores
Credit Report - a detail of your credit history
Credit Score - a number given to represent your predicted credability information from your credit reports.
What are two of the six methods to build credit we discussed in class?
- Become an authorized user on a family account.
- Secured Credit Card
- Find a Cosigner
- Student Credit Cards
- Access Boost Programs to report utilities and rent
- Credit Builder Loans
What are the Three C's of a Cosigner?
Capacity: your current financial situation and whether you have the resources to pay back a new loan
Collateral: property or financial resources that can be used as insurance in case a loan is not repaid
Character: how reliable you are at repaying debts
What is an IRA?
Individual Retirement Account: tax-deferred retirement savings that you can open yourself where you carry the risk and rewards (sometimes offered as a benefit in place of 401k)
What are Three of the Different Types of Loans
- mortgages
- auto loans
- student loans
- small business loans
- pay-day loans
Define Annual Percentage Rate (APR)
the interest rate you pay on balances you carry over from month to month. It may also include late or international transaction fees.
What is the Snowball method of debt payment?
Pays off the accounts starting with the smallest balances first, while paying the minimum payment on larger debts.
What is ROTH vs Traditional savings accounts?
With traditional retirement savings, you pay taxes when you take the money out
With ROTH you pay taxes as you put money in
According to financial advisors, what percentage of each paycheck should people put towards retirement?
10-15% per paycheck
What is a "CD" account?
Certificate of Deposit - a type of savings account where you deposit money for a fixed period (term) and earn a fixed interest rate.
What are the five factors that influence your credit score?
1. Payment history,
2. credit utilization (amounts owed)
3. length of credit history,
4. new credit,
5. credit mix
What is the Avalanche ("High Rate") method of debt payment?
Prioritizing debts with higher interest. While making minimum payments, apply additional money to loans with the highest interest rate.
What is COLA?
Cost of Living Adjustment - which is indicative of the amount of money you need to sustain a certain lifestyle in a given place. It can be beneficial to compare alongside income and other factors when choosing where to live.
According to financial advisors, what percentage of your pre-retirement income should you plan to live on to maintain a similar lifestyle during retirement?
80% (known as the 80% Rule)