Build Your Financial Knowledge with the Kikoff Financial Dictionary

Kikoff is always here to help you out on your credit journey. We want to build your financial confidence along the way.

What is a creditor? How do you explain debt? This financial glossary (aka helpful list) is designed to explain the financial terms most important to you, whether you want to find out your credit limit or start investing in financial markets.

Whatever your needs are, Kikoff has you covered, from A-Z (okay right now we don’t have anything for Z, but maybe soon!). We want to help build your credit and your confidence when navigating the often confusing and complex world of finances and financial terminology.

A

Annual return

The money you make or lose on an investment over a period of one year. For example, you invested $1,000 in different mutual funds at the start of the year, and by the end you have $1,300. Your annual return is $300.

APR (Annual Percentage Rate)

The cost of borrowing money on a yearly basis, expressed as a percentage rate.

Asset

Something that has economic value, like stocks or property.

Automatic or direct debit

A way to pay bills (like cell phone bills or utilities) automatically on a certain day each month. You need to set up these payments with the provider or company.

B

Bank

A financial institution accepts deposits, makes loans, and handles other financial transactions. You probably keep at least some of your money here! Money deposited into an account at a bank is insured up to a certain amount by the federal government, specifically the Federal Deposit Insurance Corporation (FDIC).

Beneficiary

The person or organization you name to receive money or benefits in your place. You may have a beneficiary for your life insurance or investment account.

Bill-payment service

A way to make payments online directly from your bank or credit union.

Budget

A budget serves as a plan for your financial journey, allowing you to track monthly income and expenses, control spending, and save so you can invest wisely and prepare for emergencies. There are many great tools to help you set a budget, like a budget worksheet or specific strategies like the 50/30/20 budget rule.

C

Capital gains

The money you receive from selling an investment, if you sell it for more than you paid for it. Even money received from money market funds, an alternative to a traditional savings account that pays out higher interest, will end up as a taxable capital gain.

Capital loss

The money lost from selling an investment, if you sell it for less than you paid for it.

Card replacement fee

A fee you may have to pay if your card is lost or stolen.

Checking account

An account at a bank that you can easily withdraw money to pay bills or make other purchases.

Copayment (or copay)

A certain amount that you pay for health care services like doctor’s visits or walk-in clinic visits.

Cosigner

A co-signer is generally someone who has a stable income and good credit history who agrees to be responsible for the debt if you cannot make payments. This might apply to a credit card or rental application.

Credit

Credit means borrowing money or having the ability to borrow money to purchase something. This often refers to using a credit card, but it can also involve getting a loan.

Credit Card

A credit card is like an ongoing loan that lets you borrow money up to a certain limit. You can carry over any unpaid balance from month to month. As long as you make at least the minimum payment each month, there’s no fixed deadline to repay the loan. You will pay interest on any outstanding balance.

Credit Card Statement

A credit card statement is a summary of how you’ve used your credit card during a billing period.

Credit Limit

The credit limit is the maximum amount of money you can charge on your credit card as set by the credit card company. You can use your credit card to make purchases up to this limit.

Credit Report

A credit report is a summary of your credit history and current credit situation, including your loan payment history and the status of your credit accounts. Lenders use this information to decide whether to lend you money and what interest rates to offer. Other businesses might use your credit report to make decisions about offering you services like insurance, renting an apartment, or providing utilities. Even if you don’t feel confident in your credit yet, your goals may still be within reach

Credit Score

A credit score is a number calculated from your credit history. This score helps lenders see your creditworthiness and determine the terms of credit offers or loans, for instance an auto loan. Whatever your credit score, Kikoff has tools to help you address the 3 major factors that contribute to your credit score: positive payment history, length of credit history, and low utilization rate.

Credit union

Credit unions are similar to a bank, but the key differences are that credit unions are nonprofit financial institutions that’s owned by the people who use its products and services.

Credit utilization rate

Your credit utilization rate is the percentage of credit that you’re using across any credit cards or lines of credit. If your line of credit is $2,000, and you use it to make $250 of purchases in a month, your utilization rate that month would be 12.5%.

Creditworthy

Being trustworthy to receive a line of credit or credit card. This is based on many factors, including payment history, credit utilization, and the age of your accounts.

D

Debit card

A card used to make purchases at businesses (like grocery stores and gas stations) with money in your checking account.

Debt

Any money that you owe to someone else or to a business.

Direct deposit

Money that is sent electronically to the account where you keep your money.

E

Earn

Earned income

Any and all money you make working for an employer, yourself, or from owning and running a business or farm. This also includes any wages and tips as well.

Emergency fund

An amount of money set aside in case of unplanned expenses like medical bills or car repair. An emergency fund is an important element of financial safety and financial stability.

F

Federal income tax

Taxes the federal government collects, which differs based on the earnings of individuals and businesses.

Federal Insurance Contributions Act (FICA)

A law that requires taxes to be deducted from your pay to contribute to Social Security and Medicare; your employer contributes the same amount on your behalf.

Federal minimum wage

The lowest wage a person can be paid according to the Fair Labor Standards Act (FLSA).

Financial emergencies

Unplanned expenses that require urgent attention.

Financial stability

The ability to meet all your financial needs, including any bills and expenses, while still feeling secure and confident.

Fixed expenses

Expenses, like bills, that must be paid each month and generally cost the same amount. Some fixed expenses, like a utility bill, may also be variable because the amount changes each month depending on usage.

Form W-4: Employee’s Withholding Allowance Certificate

A form that employees complete and the employer uses to determine the amount of income tax that is withheld.

G

Gig

A project, task, or service that someone is hired as a contractor to do. Taxes are usually not withheld by the business that hires a gig worker, meaning they have to pay on their own. Food delivery and rideshare drivers are generally classified as gig workers.

Government benefits card

A prepaid card issued to someone by a government agency to pay for certain benefits, like EBT/SNAP benefits or unemployment insurance.

Gross income

Your total pay before any taxes and deductions are taken out.

H

Health savings account

An account at a bank, insurance company, or other financial institution that lets you set aside pre-tax money, sometimes directly from your paycheck, to pay for certain medical expenses.

I

Identity theft

Using your personal information — your name, Social Security number, or credit card number — to impersonate you or make purchases as you without your permission.

Inactivity Fee

An inactivity fee is a charge that some prepaid cards may apply if you don’t use the card for a certain period. Not all prepaid cards have this fee, and the timeframe that triggers the fee can vary.

Income

Income is the money you earn or receive from different sources, like wages, salaries, tips, government payments, tax refunds, or gifts.

Income Tax

Income tax is collected by federal, state, and local governments on both earned income (like wages, salaries) and unearned income (such as interest or dividends earned from stocks and mutual funds). Not all states or localities have income taxes.

Inflation

Inflation means that prices for goods and services generally go up over time. This means that over the years, the same amount of money will buy fewer goods and services due to rising prices.

Interest

Interest is a fee charged by a lender when you borrow money. If you deposit money into certain types of accounts at a bank or credit union, they may pay you interest as a way to encourage saving.

Interest Rate

An interest rate is a percentage that a lender charges you to use borrowed money. When you borrow money, you pay interest based on this rate. Similarly, when you save money in a bank account, you may earn interest based on the interest rate offered by the bank or credit union.

Invest

To put money into some kind of asset, like specific stocks in the stock market, in hopes that those assets increase in value.

Investment fees

The amount of money you pay to any financial professionals or brokerage firms for products and services, like investment advice.

L

Lender

Any person or company that lends money to you with the expectation that you will pay them back, generally with interest.

Liability

A financial disadvantage, like credit card debt or other types of debt obligation.

Loan

Money that needs to be repaid by the borrower, generally with interest.

M

Minimum payment

The minimum amount you have to pay back per month on credit card payments, loan payments, or any other debt.

Mobile banking

The ability to get into your bank account or credit union account and manage your money from a phone or mobile device. Specific mobile banking services are different depending on your financial institution.

Money market deposit account

Money market accounts are federally insured and generally pay higher interest rates than other types of savings or checking accounts.

Money order

Money orders are an alternative to cash or checks that you can use to pay small debts and bills.

Mortgage

Mortgage loans are used to buy a home or to borrow money against the value of a home you already own.

Mutual funds

A mutual fund pools your money with money from other people to buy stocks, bonds, and other investments. A mutual fund is managed by a professional money manager who makes decisions on your behalf. A mutual fund is a popular place to start investing.

N

Needs

Things you must pay for to sustain your basic lifestyle. These necessities typically include housing costs, utilities, transportation, food, healthcare, and paying off debt.

Net income

Net income or take-home pay is your monthly income after all taxes are taken out, including federal, state, and local tax.

O

Online banking

The ability to get into your bank account or credit union account and manage your money on the internet. Specific mobile banking services are different depending on your financial institution. You can usually set up transfers to an investment account like a mutual fund with online banking.

Online or mobile bill payment

A way to pay bills that you manage from your bank account or credit union account on the internet or on your phone. You can make bill payments right away or schedule them to be automatic.

Overdraft

An overdraft is what happens when you make a purchase that is more than you have in the bank.

P

Payroll tax

Taxes withheld from each paycheck that include Social Security and Medicare taxes.

Prepaid card

A card that you load money onto upfront and then use like a debit or credit card. Even though it looks like a credit or debit card, a prepaid card is not linked to any bank account.

Profit

Money that is made in a business after all the costs and expenses are paid.

Property tax

Taxes on what you own, automobiles for example.

R

Regular income

A set amount of money you receive at the same time each week or month.

Repayment

Paying back the money that you have borrowed.

S

Salary

The set amount of money you get for doing your job over a period of time like a week, month, or year.

Savings

Money you have in a bank account or other secure place that you can use for the future.

Savings goal

The amount of money you plan to put aside for a specific purpose.

Secured credit card

Unlike traditional credit cards, secured cards require a cash deposit as collateral to start things off, which typically becomes your credit limit. This deposit reduces the risk for the credit card issuer, making it easier to qualify even without a job.

Services

Any action that you or anyone might do for someone else in exchange for money.

Share

A small piece of something, often in a company’s stock or in one or more mutual funds.

State income tax

Most states require residents to pay a personal income tax on top of federal income taxes. State taxes are generally either progressive (different depending on income level) income tax or a flat rate.

Stock

A way to invest that gives you a small amount of ownership in a company.

T

Tax deduction

Usually a personal or business expense that lowers the amount of your income that is taxable.

Tax refund

The money owed to you by the government as a taxpayer if you overpaid for any reason.

Term

The period of time something lasts, usually a mortgage or a loan.

Tip

Also called a gratuity, this is additional money that a customer might give to an employee.

Tip income

All the additional money accumulated from tips at your job. Depending on your job, this might make up a lot of your total income.

Transaction fee

A fee, usually small, that you are charged every time you make certain transactions with a card. Think of a credit card processing fee at a restaurant for example.

U

Unauthorized use

Something purchased or done with your card (credit, debit, or ATM) that you didn’t approve or do on your own.

Unsecured loan

A loan that does not require collateral, aka money up front. Credit cards, student loans, and personal loans are unsecured loans. Borrowers give unsecured loans based on your creditworthiness.

V

Value

The amount of money that something is worth.

Variable expenses

An expense that changes amount from month to month. Examples include groceries, entertainment, and transportation.

W

Wage

The money you are paid for doing your job. Wages include hourly pay, tips, bonuses and any other form of payment from your job.

Wants

Also sometimes called discretionary spending, wants are things that you like and that impact your quality of life, but are not absolute necessities. These might include hobbies, travel, or dining out.

Withholding (or “pay-as-you-earn” taxes)

The amount of federal income tax taken out automatically (withheld) by your employer from your paycheck. The amount depends on how much you earn and what information you put down on your W–4.

Apply what you’ve learned!

Hopefully this list of financial terms can be your new home base whenever you’re confused about money. And if you want to dive deeper into topics like APR, credit cards, budgets, or loans, we have you covered too.

With just a little research over time, you’ll gain more and more familiarity with the tools you need to help with your credit, interest payments, or anything else that matters to you!

Whatever your long term goals are, Kikoff provides fair, effective, and simple tools that empower you to meet your financial goals.