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Education

Financial Literacy 101: A Guide to Successful Banking
Articles & Updates, Education

Financial Literacy 101: A Guide to Successful Banking

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Financial literacy remains one of the most important skills to possess in today’s banking industry. Below, we break down some common banking terms used here at Consumers National Bank.

  • 401 (K) plan: a personal retirement fund provided by a company for employees; the taxes on these savings plans are deferred until retirement
  • Annuity: a sequence of payments made at designated, evenly spaced intervals, with a specific compounded interest rate
  • APR: Annual Percentage Rate; the total interest generated by an investment over a year-long period, neglecting compound interest
  • APY: Annual Percentage Yield; total rate of return on an investment, taking compound interest into account
  • Bankruptcy: a legal proceeding, governed by Chapters 7 and 13 of the federal bankruptcy code, which declares someone unable to pay their debts
  • Collateral: also referred to as security, any property that is offered to a bank in order to secure credit, such as a loan; upon default, the property is forfeited
  • Cosigner: someone other than a principal borrower who signs on a loan and assumes equal liability for the loan
  • Foreclosure: a legal process enacted when a debt cannot be paid; property is sold in order to settle the debt
  • Inflation: the general trend of the price level; the value of a dollar declines
  • Interest: a fee for use of loaned money accrued over time; the lender receives the revenue
  • Lien: the claim a creditor makes against a property in the event of default
  • Liquidity: adjective that describes how easy or difficult it is to convert an asset into cash with minimal loss of value; sometimes used to refer to amount of credit immediately available
  • Predatory lending: a lending practice that targets vulnerable groups, such as low-income households and the elderly, to take advantage of their assumed lack of financial understanding
  • Prime rate: the credit rate that banks charge opportune credit-eligible borrowers, usually the lowest rate available
  • Principal: the amount of a loan that remains unpaid, not counting interest
  • Securities: Paper certificates or electronic documents proving ownership of stocks or debts

Do you still have questions regarding the terms above? You can always contact us and we are here to help! We strive to Make A Difference in your financial life at Consumers National Bank!

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