Personal finance glossary
Short, plain-language definitions of the terms you will see in our guides and calculators. Each term links to a guide or tool when we have one.
- 401(k)
- A workplace retirement savings plan. In 2026 the employee contribution limit is $24,500. Learn more
- Amortization
- Paying off a loan in installments that cover interest and principal. Early payments are mostly interest; later ones are mostly principal. Learn more
- APR (annual percentage rate)
- The yearly cost of credit as a percentage. On loans it includes the interest rate and certain fees; on credit cards it is used to calculate daily interest. Learn more
- APY (annual percentage yield)
- The yearly return on a savings account including the effect of compounding. Useful for comparing accounts. Learn more
- CFPB
- Consumer Financial Protection Bureau: the federal agency that oversees consumer financial products and takes consumer complaints.
- Compound interest
- Interest calculated on the principal and on interest already earned. It makes money grow faster over time. Learn more
- Credit bureau
- A company that compiles your credit history. The three nationwide bureaus in the U.S. are Equifax, Experian and TransUnion. Learn more
- Credit report
- A record of your credit accounts and payments. You can get it free from each bureau at AnnualCreditReport.com. Learn more
- Credit score
- A number that summarizes the risk in your credit history. It affects approval and rates for loans and cards. Learn more
- Credit union
- A not-for-profit financial institution owned by its members. Deposits are insured by the NCUA.
- Credit utilization
- The share of your credit limit you are using. Keeping it low helps your score. Learn more
- Down payment
- The part of the price you pay upfront when buying a home or car; the rest is financed with a loan.
- DTI (debt-to-income ratio)
- The share of your gross monthly income that goes to debt payments. Lenders use it to judge whether you can take on a new payment. Learn more
- EITC (Earned Income Tax Credit)
- A federal tax credit for low- and moderate-income workers. It requires a valid Social Security number for work.
- Emergency fund
- Easy-to-reach savings for unexpected expenses, such as a repair or a temporary loss of income. Learn more
- Employer match
- A contribution your employer makes to your retirement plan when you contribute, based on the plan formula. Learn more
- FDIC
- Federal Deposit Insurance Corporation: insures deposits at insured banks up to $250,000 per depositor, per bank, per ownership category. Learn more
- Grace period
- The time between the statement closing date and the due date when no interest is charged on purchases if you pay the full balance.
- IRA
- Individual retirement arrangement with tax advantages. It can be traditional or Roth. Learn more
- ITIN
- Individual Taxpayer Identification Number issued by the IRS to people who must deal with federal taxes and cannot get a Social Security number. Learn more
- Minimum payment
- The smallest amount you must pay on your card to stay current. Paying only the minimum stretches out the debt and raises interest. Learn more
- Mortgage
- A loan to buy a home, secured by the property itself. Learn more
- Overdraft
- When you spend more than your account balance and the bank covers the difference, usually for a fee. Learn more
- Principal
- The amount you borrow or invest, not counting interest.
- Profit margin
- Profit divided by the selling price. It differs from markup, which divides profit by cost. Learn more
- Remittance
- Money sent to another country. The CFPB rule gives you the right to see costs before you pay and generally to cancel within 30 minutes. Learn more
- ROI (return on investment)
- The gain or loss on an investment as a percentage of the amount invested. Learn more
- Secured credit card
- A card backed by a deposit that becomes your limit. Used to start or rebuild credit history. Learn more
- Simple interest
- Interest calculated only on the original principal: principal × rate × time. Learn more
- Standard deduction
- A fixed amount subtracted from income when figuring federal tax. For tax year 2026 it is $16,100 for single filers, according to the IRS. Learn more
- W-2 and 1099
- A W-2 reports employee wages with taxes withheld; a 1099-NEC reports payments to independent contractors with no withholding. Learn more
General information, not financial, tax or legal advice.