Understanding key banking terms is an important part of making financial decisions. These 5 terms and acronyms are commonly used in banking:
FDIC stands for “Federal Deposit Insurance Corporation” and it guarantees that no matter what happens to the bank, your deposits are insured up to $250,000.
APR is an acronym for “annual percentage rate”, which is the interest you’re being charged to borrow money plus the costs associated with the loan on a yearly basis. Basically, it’s the annual “price” of borrowing money.
APY is short for “annual percentage yield.” Basically, it’s the percentage rate that determines the total amount of interest you’ll earn, based on the interest rate and frequency it’s compounded in a year. You can think of compounding as “interest on interest.
FICO stands for Fair Isaac Corp. and is one of the leaders in credit scoring models. A FICO score is different than a credit score and is based on 6 factors: account status, payment history profile, current balance, credit limit, high credit/original loan amount, and amount past due.
DTI is an acronym for “debt-to-income” ratio. It’s your monthly debt payments divided by your gross monthly income (before taxes). It’s one part of how lenders determine if they will lend to you.
With a better understanding of these important banking terms, you’ll feel more comfortable and informed when making financial decisions.
Fulton Bank, N.A. Member FDIC