Banking Jargon Decoded: Your Guide to Financial Terms

Understanding the language of personal finance can make a big difference in how you manage and grow your money. To help, we've created a guide to demystify commonly used financial terms so you can make well-informed decisions and feel more confident in your financial journey.

Core Credit Concepts

Credit Score

Your credit score is a three-digit number representing your credit history and overall creditworthiness. A high credit score often leads to more favorable terms on loans, such as lower interest rates. UT Federal Credit Union (UTFCU) can help you monitor and improve your score for greater financial opportunities.

Credit Limit

This is the maximum amount you can borrow on a credit line, such as a credit card. Staying well below your limit and making timely payments is key to maintaining a healthy credit score.

Income-Related Financial Terms

Direct Deposit

Direct deposit lets your paycheck or benefits be transferred electronically into your bank account. With UTFCU's direct deposit options, you get quick access to your funds without visiting a branch.

Gross Income vs. Net Income

Gross income is your total earnings before taxes and deductions, while net income is what you take home after subtracting these amounts. Knowing both can help you plan your budget effectively.

Loan Language

Principal

This is the initial amount of a loan before interest is added. The faster you pay down your principal, the less interest you'll pay over the life of the loan.

Amortization

Amortization is the process of paying off debt over time through regular payments. Each payment contributes partly to the principal and partly to the interest, gradually reducing your total debt.

Collateral

Collateral is an asset you pledge to secure a loan, like a car for an auto loan or a house for a mortgage. If you cannot make payments, the lender may use the collateral to recover the loan amount.

Rates and Ratios

APR (Annual Percentage Rate)

APR reflects the annual cost of borrowing, including interest and any fees. It gives you a clear picture of the loan's true cost and is useful for comparing loan offers.

APY (Annual Percentage Yield)

APY shows the real return on your savings over a year, including compound interest. Higher APYs on savings accounts, like UTFCU's certificates, mean your savings grow faster.

Debt-to-Income Ratio

DTI measures your monthly debt payments compared to your income. It's an important figure that lenders use to gauge how well you can manage monthly debt payments and new loans. Learn more about DTI here.

Transaction Terms

Overdraft

An overdraft happens when you spend more than what's available in your account. At UTFCU, we offer overdraft protection to help cover these instances and keep your transactions running smoothly.

ACH (Automated Clearing House)

ACH is a system that processes electronic payments or money transfers, like direct deposits or recurring bill payments. ACH transactions make it easy to send and receive money securely.

Investment Instruments

Certificate

A certificate at UTFCU is a savings account where you deposit money for a fixed term in exchange for a higher interest rate. Certificates are ideal for savings goals that don't require immediate access to your funds.

Dividend

A dividend is the payout you receive from investments or certain deposit accounts, like a share of earnings. With a UTFCU savings account, for example, you can earn dividends that boost your balance over time.

Mutual Fund

Mutual funds pool money from multiple investors to invest in stocks, bonds, or other assets. They're professionally managed, making them a hands-off way to diversify your investments.

Navigating Banking Policies

Minimum Balance Requirement

Some accounts require a minimum balance to avoid fees or earn interest. UTFCU has options with low or no minimums to help make banking accessible for everyone.

FDIC/NCUA Insurance

UT Federal Credit Union is insured by the NCUA (National Credit Union Administration), which means your deposits are protected up to $250,000 per account holder.

Grace Period

This is the timeframe after a billing cycle ends, during which you pay off a balance without incurring interest. Credit cards and some loans offer grace periods to give you a chance to pay off balances interest-free.

At UT Federal Credit Union, we're committed to empowering you with the financial knowledge you need to succeed. Whether you're looking to build credit, save more effectively, or understand your banking options, our team is here to support your goals every step of the way.

Ready to learn more or get started with a new account? Contact us or stop by any UTFCU branch today!