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What Does That Mean?
Financial Institution
As a general definition, a financial institution is an organization that allows people to save and/or borrow money. Two main financial institutions are banks and credit unions.

Credit Union
A credit union is a not for profit financial institution to which anyone who deposits money becomes a member and benefits from the services offered. You must be a part of a certain community to belong to a credit union (i.e. live, work, attend school, or worship in the area in which the credit union is located). A credit union is operated by a volunteer Board of Directors, formed by elected members. Any left over funds, after a secure financial reserve is established, are given back to its members in the form of lowered interest rates on loans and higher dividends for savings and investment accounts.

Bank
A federal financial institution ran by a paid Board of Directors. There are no community requirements to hold an account at a bank, as most of them are nation wide (i.e. Chase, PNC, etc.). However, customers of a bank do not own a small share nor do they have decision making power, as do members of a credit union.

Savings Account
An account held at a financial institution into which money can be deposited and withdrawn. These funds can earn interest, meaning your balance grows by a set percentage just for being there! You cannot withdraw money from a savings account by writing a check. You must fill out a withdrawal slip at the bank, use an ATM card, or have your funds transferred to a checking account. A very small dollar amount is needed to maintain a savings account (normally around $5).

Checking Account
An account held at a financial institution into which you can deposit money and write checks (or use a debit card) to withdraw money or transfer funds as payment. For example, if you owe your Uncle Bobby $10 for cutting your hair, you can fill out a check (provided by the bank) and he will take it to the bank and exchange it for money. If you’re buying something at the store, you can swipe your debit card and the funds will be transferred from your account to them. Some checking accounts allow you to earn interest, but not all.

Debit Card
A debit card looks just like a credit card, only it has a different function. Your purchase is paid for directly out of the checking account connected to the card, rather than being billed at a later date. Your debit card can also be used to complete transactions (namely deposits and withdrawals) at an ATM.

Credit Card
A plastic card that is used to make purchases on credit. It’s like borrowing money from the credit card company. The company (Visa, MasterCard, Discover, etc.) pays the amount and will send a bill to pay them back. Be careful with credit cards! If the balance of the total purchases is not paid off in full when the bill is due, you will be hit with interest rate, finance charges, and possible late fees. Having a credit card can be useful so long as you don’t get in too deep.

ATM
ATM stands for Automated Teller Machine. They are located outside a bank as well as inside many establishments (such as restaurants). You can use your ATM or debit card to perform any of the following tasks: make a deposit or withdrawal, check your current account balance, transfer money from one account to another, and/or other various things.

Deposit
Putting money into an account.

Withdraw
Taking cash out of an account.

Loan
To take out a loan, you are borrowing money with the understanding that you will pay your lender back, usually with interest. A lender can be a credit union, bank, or other loan company. Loans can be taken out for various reasons: purchasing a vehicle or home, education, house repairs, starting a business, etc. Before qualifying for a loan, your lender may have to run a credit check to be sure that you are likely to make efficient, on time payments.

Investment
Putting money into something that will, over time, result in financial gain. Investments include stocks, bonds, IRA accounts, Certificate of Deposit accounts (CDs), 401(k), mutual funds, etc. This can be complicated and risky at times. It is always a good idea to consult a professional when considering investing.

Dividend
Profit that gets dispersed among shareholders of a corporation. Since a credit union is a not for profit organization, members receive dividends in the form of higher interest on savings and investment accounts.


Interest
Interest is the cost of borrowing money. It is a certain percentage of the money borrowed. If you borrow money from a lender, what you pay back will include interest. Essentially, a bank is borrowing from you when you hold a savings, checking, or investment account, therefore, you earn interest just for letting them house your money.


Credit
Your reputation with bills and paying back loans. Your credit score reflects, among other things, whether you pay bills on time and with the minimum amount due.
 
 
 

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