Annual Percentage Yield (APY) – This reflects the annual compounded yield earned on an interest earning account. As examples, a 4.0% interest rate would also have an APY of 4.0% if interest was compounded annually, but the APY would be 4.06% if interest were compounded quarterly.

Annuity (Fixed) – A safe money place offered by an insurance company paying either a fixed interest rate or fixed participation in an index.

Annuity (Immediate) – Also called an income annuity, paying a regular income for a specific numbers of years, for life, or for a combination of the two.

Annuity (Variable) – an investment security offered by an insurance company aptly described as a mutual fund within a tax-deferred wrapper.

Basis Point – One one-hundredth of a percent. The difference between 5.02% and 5.03%

Brokered CD – A certificate of deposit purchased from a broker instead of directly from a bank. some brokered CDs cannot be surrendered before the end of the period.

Callable CD – A certificate of deposit whereby the bank can stop paying interest and send you back your money at their discretion, and this usually happens when current rates have dropped lower than what your callable CD is paying.

Certificate of Deposit (CD) – A time deposit offered by a financial institution.

Commercial Paper – Short term loans offered by companies.

Compounding (Interest) – When interest is earned on interest.

Consumer Price Index (CPI) – A government cost of living index reflecting inflation.

Coupon – Another name for a bond’s interest rate dating back to the days when a bondholder physically clipped off an interest coupon and presented it to the lender for payment.

Credit Union – Offer the same safe money places as banks and the covered account values are also federally insured. Credit Unions are owned by their members and are non-profit entities.

Deferred Annuity – Refers to the ability to defer taxes on interest earned and is available on a fixed rate, index or variable annuity.

Demand Deposit – Bank account money that can be withdrawn upon demand (a checking account)

Dividend – In the investment world it is a yield paid on a share of stock either in the form of cash or more stock. In the savings world it is money paid (interest) to credit union members on their deposits.

Electronic Funds Transfer – Consumer directed money sent electronically (bill paying), received (ATM) or transferred (from one bank account to another).

FDIC Insurance – Covers deposit accounts, dollar for dollar, including principal and any accrued interest, up to the insurance limit.

Guaranty Associations – Created by state legislatures to protect life, annuity and health insurance policyholders and beneficiaries of an insolvent insurance company. Every state (plus Puerto Rico) provides $100,000 in withdrawal and cash values for all individual fixed annuities. Seven states (and one District) have higher limits:

Index Annuity – A fixed annuity in which interest earned is linked to the performance of an external index.

Index CD – A certificate of deposit in which interest earned is linked to the performance of an external index.

Individual Retirement Account (IRA) – A government sanctioned tax advantaged savings vehicle.

Interest – Money paid or earned for use of money.

Laddering – A savings concept combining CDs, bonds, or annuities with different terms to maximize potential interest.

Linked Savings Accounts – Are linked to a personal checking account, and money to or from the saving account is electronically transferred at customer request. 

Liquidity – The ability to get cash from an instrument now.

Market Value Adjustment (MVA) – An annuity feature where changes in the interest environment are taken into account if and only if the annuity is surrendered prematurely. What this can mean is if rates have risen since you started the annuity the penalties for cashing out could be higher than the schedule stated in the policy and if rates have fallen since you took out the annuity the penalties could be lower or even zero.

Maturity – The date bond principal is returned, a CD quits earning interest or a deferred annuity must begin paying an income.

Minimum Balance – The least dollars in an account that must be kept to avoid bank fees.

Minimum Guarantee – Only available with savings bonds and fixed annuities, a minimum return or interest rate that will be credited regardless of economic conditions. The annuity minimum guarantee is effective from day one, the savings bond minimum guarantee kicks in after 20 years.

Minimum Premium – The smallest amount of cash that buys an annuity.

Money Market Account – An FDIC backed bank account permitting limited withdrawals.

Money Market Fund – A non-FDIC backed mutual fund account permitting limited withdrawals.

NCUA – Charters and supervises federal chartered credit unions

National Credit Union Share Insurance Fund (NCUSIF) – A federal fund for credit union deposits backed by the full faith and credit of the United States government similar to FDIC.

Office of Comptroller of the Currency (OCC) – Regulates all national banks.

Office of Thrift Supervision (OTS) – Regulates thrifts and savings banks.

Passbook Account – In which records of deposits, withdrawals and interest are stamped and recorded in a booklet

Prime Rate – The loan interest rate a bank charges its best customers.

Roth IRA – An IRA wherein contributions are not deductible but distributions are not taxed, which is the exact opposite of the way other qualified accounts work.

Savings Account – Bank instrument that usually features low yields that are fully taxable, but money is extremely liquid and FDIC insured. However, internet banks may offer very competitive savings accounts.

Simple Interest – When interest is earned only on original principal.

Statement Savings Account – Whereby the consumer receives a quarterly or monthly statement showing deposits, withdrawals and interest activity.

Surrender Penalties or Charges – Used by the insurance company to recoup initial costs if an annuity is cashed in prematurely. 

Tax Deferred – Delaying the payment of income taxes on interest earned until a future day allowing that interest that would have gone to the IRS to earn interest in the meantime.

Yield curve – A comparison showing the relationship between yields and terms. Typically, long- term vehicles have a higher yield than shorter term. An inverted yield curve results when short-term rates are higher than long term rates.

Zero Coupon – a Bond or CD where interest is compounded and only paid out at maturity.