Did you know that four in seven Americans are financially illiterate?
As a newcomer to the U.S., you do not just need basic financial literacy, you also need to understand American financial jargon.
Whether it is day-to-day banking, in newspapers and other publications, or the currency exchange markets in America, you may hear words that make little sense to you.
You might know the concept, but the American term for it might be unfamiliar.
Knowing the financial terminology, banking terms, definitions, and American words for basic money-related terms could be lifesaving. At the very least, it could stand to save you some money.
Lack of awareness, on the other hand, could lead to grave repercussions.
You won’t be able to get the required financial services, and confusion can lead to monetary losses or penalties. You become an easy target for scammers, and when you are already on a shoestring budget and in a new country, this doesn’t help.
The solution? Finance terms 101.
This primer for American financial jargon will keep you aware, prepared, and prudent.
Banking Terms and Definitions:
- Annual Percentage Rate (APR) – This refers to interest paid annually during the lifetime of a loan. The higher the APR, the more you’d be spending on interest and fees, and less on principal repayment.
- Roth IRAs and traditional IRAs – Types of retirement savings accounts you can open with a bank. Traditional IRAs come with tax deductions, but Roth IRAs don’t.
- 401(k)s – 401(k)s are retirement savings accounts available through some employers. By signing up for one, you agree to have a part of your paycheck deposited in the account. Some employers may also match your contribution to varying extents.
- The Five C’s of Credit – Factors that lenders consider before extending loans. These include:
- Capacity – repayment ability
- Conditions – terms of the loan
- Collateral – security for the loan
- Capital – income and money sources
- Character – borrower’s reputation
- Annual Stockholders Meeting – The yearly meeting of shareholders or members of a club, organization, or company. It is usually held to allow voting and reporting financial matters. It is the American counterpart of the British term Annual General Meeting.
- Bellwether Stock – Stock(s) used to indicate and understand the general trend of the market or macro-economy. You might be familiar with the word Barometer stock, which means the same thing.
- Prime Rate – The minimum rate of interest on which you can get a bank loan. Non-Americans often use the term ‘base rate.’
- Stock Split – This is a situation when the number of shares of the company increases without any increase in the market capitalization. Existing shares are split, and the per-share value declines. Companies can also announce reverse stock splits where shares are consolidated to reduce the number of shares and increase the per-share price.
- Check – A document used by accountholders to pay money or transfer funds from their accounts. Usually spelled as ‘cheque’ in the UK, India, and some other countries.
- Checking Account – An account at a physical or online bank or credit union that can be used to make deposits, and then payments can be drawn against it. It is also called a transactional or current account in other countries.
- Treasury Bonds – Also called T-bonds, these are interest-bearing government debt securities. Treasury bonds are issued by the U.S. Federal Government (treasury) and have a maturity period of less than 20 years.
- Common Stock – The American term for ordinary shares or voting shares, common stock is a type of corporate equity ownership that allows the stockholder to receive dividends, if and when announced by the company.
- Consumer Price Index – A measure of change in the weighted average prices of the market basket including consumer goods and services. In other countries, the CPI is called the Retail Price Index (RPI)
- Merchandise Trade – Import or export of stock of material resources that causes an increase or decrease in the material holdings of the country. Also called visible trade.
- Bills – In general, a bill is globally accepted as a statement showing how much money you owe to the seller or service provider. Examples are a grocer bill or a bill at the hotel. In American English, bills also refer to pieces of paper money. What you’d call a $100 note is called a $100 bill in America.
- Routing Number – Also called the ABA Routing Transit Number. It is a 9-digit code used to identify financial institutions for clearing or fund transfer. It is usually printed on the bottom left of personal checks.
- FDIC – The Federal Deposit Insurance is a government-run organization that insures customer’s bank deposits up to $250,000 if the bank fails.
- Certificate of Deposit (CD) – An account for keeping long-term deposits in return for higher interest, as compared to saving or checking accounts.
- Returned Item Fee – A fee charged on bounced checks. It is charged if the account on which the check is drawn has insufficient funds and the transaction is declined by the bank. If the transaction is processed and the account now has a negative balance, it is called an overdraft fee.
- Credit score/Credit history – The measure of the borrower’s ability to get a loan, and the lender’s willingness to extend the loan. A higher credit score or good credit history means the borrower has a consistent record of making interest and bill payments on time. Higher credit scores and better credit history can help get lower interest rates, better loan terms, higher amounts of loans, and more credit.
- Electronic Signature – Also called e-signature, it is a legally binding way to approve an electronic document. U.S. Federal law gives e-signatures the same legal validity as physical signatures on paper.
- Maturity – The date on which a loan becomes due in full, or CDs become due for withdrawal or renewal.
- Grace Period – Extra time that is allowed to a borrower to pay credit card bills or loan repayments without incurring penalties or extra charges. In the case of CDs, it is the time until the end of which you can withdraw your matured deposit without facing a penalty.
- Early Withdrawal Penalty – The penalty charged on withdrawing or closing an account before its maturity date. It is applicable on IRAs and CDs.
- Equal Credit Opportunity Act – An important federal law that prohibits discrimination in credit transactions or due to color, race, caste, gender, national origin, income source, religion, age, or marital status.
- Micro Deposits – Small deposits of $1 or $2 to verify the account that you are trying to link with your bank account. After verification, micro-deposits are usually reversed.
- Extended Overdrawn Balance Charge – A fee charged for having a negative bank balance (overdraft) for more than five business days.
- Traveler’s Check – A check that acts as cash, but is protected against theft and loss.
Now let us take a look at some more financial terms and American words for them.
- The word merchandise is used to refer to goods. Similarly, inventory is a popular term that means stock.
- The profit and loss account of a business is referred to as the income statement in America.
- What you would call bad debts elsewhere are called uncollectible in America. No matter what you call it, the essence remains the same: The credit/loan you extended has sunk and isn’t recoverable now.
- The accounting year, usually a period of 12 months stipulated for accounting purposes, is called a fiscal year in the U.S.
- Credit notes issued in business are called credit memos.
With that, you now know basic American financial terms and concepts, and you’ll be in a better position to navigate banking and financial matter in the United States.
But, what about conversations with your peers? Most Americans are fluent in money-related slang, but if you aren’t familiar with it, you could miss out.
To give you a head start on your journey of learning American jargon and lingo, here are some commonly used financial slang terms:
- Buck means a dollar. If a shopkeeper tells you something costs 10 bucks, you don’t have to fish for currency called a ‘buck.’ Just hand over a $10 bill.
- Dough is slang for money. For example, if you wait for a sale to shop for something, you can surely save a lot of dough.
- If you are out with friends for a meal, and you are asked to chip in, it means everyone is contributing a part of the shared meal’s cost. You could also be asked to chip in for a collective purchase like a gift for your teacher or boss.
- Cough up money is a term used when you want to denote that the payment was made or money was spent with much reluctance. A use case could be, “Without health insurance, I had to cough up $10,000 for hospital bills.”
- If you hear someone being referred to as loaded, it means they are extremely rich. For example, “His parents buy him a new car every year. They must be loaded.”
- Rake in cash means getting or making large amounts of money. The Friends cast has been raking in huge sums even after the show stopped airing on TV.
Are you feeling a bit more prepared to face American financial systems and financial conversations now?
Go show off your newfound knowledge, but don’t forget to be money-wise, and ask questions if you aren’t sure about something. In money matters, asking twice is better than not knowing.
