Glossary - C

call option

An option contract that gives you the right to buy (but does not lock you into buying) the underlying asset at a specified price, at or before a certain time in the future. You would use a call option when you expect the price of an asset to increase.

cap

A check that prevents you from going over your limit on calls, texts or data.

capital

For individuals, the money or other assets owned for the purpose of investing. For a company, the funds received from owners or investors to further its business objectives.

capital depreciation

A decrease in the value of a capital asset.

capital gain

The difference between what you paid for an asset (including buying costs) and what you got when you sold it (less selling costs).

capital gains tax

A tax on profits made from buying or selling certain assets.

capital growth

The increase in value of an asset over time. Also known as capital gain.

capital guarantee

A product where investors are protected against significant loss of the amount invested. Can contain clauses and performance hurdles that limit the protection. Also called capital protection.

capital stable fund

A fund that invests across a range of asset classes but with a significant portion in defensive assets such as fixed interest investments and cash and a small portion in growth assets such as shares and property. This type of fund aims to provide a moderate level of income with some capital growth.

cash advance

Cash withdrawn from a credit card account. A transaction fee is usually charged, as well as interest from the date the cash is withdrawn until it is paid back in full.

cash investments

Money invested in short-term, interest-paying investments. Having money in a bank account is an example of a cash investment.

cash management account

A transaction account used to receive cash from investments such as dividends or proceeds of sales, and from which new investments are purchased.

cash out facility

Offered by many retailers such as supermarkets, where you can take out extra cash from your cheque or savings account when you pay for purchases with your debit card.

cash rate

The interest rate charged on overnight loans between banks. The Reserve Bank of Australia (RBA) sets a target cash rate in order to control monetary policy.

caveat

In relation to property law, a caveat is a legal notice that shows who has an interest in your property. You can't register a dealing (for example, to sell the property) until all caveats are removed or you get the consent of any people who hold a caveat. To put a caveat on your property or remove a caveat, contact your state's Land Titles Office.

CDO

A bundle of individual loans such as car loans, credit card debt or corporate debt put together and sold as a single investment.

CFD

A contract between a seller and a buyer who are effectively betting on the short-term movements in the price of shares or other traded investments. The gain or loss is the difference between the price of the asset when the contract was made and the price in the future when the contract is closed out. If the price increases, the seller pays the buyer. If the share price decreases, the buyer pays the seller. Contracts are usually made with borrowed money (leveraged) which can magnify gains or losses.

chargeback

A return of funds from a retailer or service provider to a consumer's bank account, line of credit or credit card, often initiated by the consumer's bank.

churning

The process of moving a customer from one financial product to another in order for an adviser or broker to earn a fee. This practice usually has little or no benefit to the customer.

clearout

A clearout occurs when your lender has not been able to get in touch with you, despite making reasonable efforts to contact you.

co-borrower

A person who borrows money jointly with you. Each person is responsible for the loan, so if one of you does not pay, the other person must pay the full amount.

co-contribution

A payment made by the Government to the super fund of a low or middle income earner to reward them for making personal contributions to super. If you earn less than $37,697, the Australian Government will contribute $0.50 for every $1.00 of after-tax super contribution you make, up to a maximum of $500.

The maximum co-contribution will reduce if your income is higher and no co-contribution is payable if you earn more than $52,697 a year.

cold call

An unexpected call or visit by an unknown person, trying to sell something.

collateral

Property or assets you put up as security for a loan.

collateralised debt obligations (CDO)

A bundle of individual loans such as car loans, credit card debt or corporate debt put together and sold as a single investment.

collectables

Items that are rare or in demand and may increase in value over time. Examples include artwork, antiques, coins and wine.

commission

A fee paid to an adviser or salesperson as an incentive for selling a particular product. An upfront commission is based on the sale amount of the product. An ongoing commission is based on the balance of the account.

commutation

Process of converting part or all of a pension or annuity into a lump sum.

comparison rate

A rate that helps you work out the true cost of a loan. It includes the interest rate, and most fees and charges relating to a loan, reduced to a single percentage figure.

compound interest

Interest paid on the initial principal and the accumulated interest on money borrowed or invested.

comprehensive insurance

Cover that provides the policy holder with broad protection. For example, comprehensive car insurance will cover loss or damage to your car and any damage you may accidentally cause to other people‚Äôs property.

concessional super contributions

Concessional super contributions are payments put into your super fund from your pre-tax income and are tax deductable for self-employed people. They include your employer's super guarantee (SG) contributions. Concessional super contributions are taxed at 15% when they are received by your super fund.

condition of release

A nominated event you must satisfy to be able to access superannuation savings. Examples include permanently retiring from the workforce after reaching preservation age, reaching age 65 or becoming totally and permanently disabled.

condition report

Records the condition of a rental premises at the start of a tenancy.

conflict of interest

A situation in which someone in a position of trust has competing professional and personal interests which could make it difficult for them to remain impartial. For example, an adviser or broker may sell you a product that benefits them more than it does you.

consumer credit insurance (CCI)

Insurance that covers you if something happens that affects your capacity to meet the payments on your loan. CCI usually covers risks such as illness, death, disability or involuntary unemployment.

consumer lease

A consumer lease is an agreement where you get a hire an item (eg tv, fridge, washing machine), receive the item straight away and make regular payments until the term of the agreement finishes. At the end of the agreement term you will have paid more than the purchase price of the goods. These agreements might also be known as a rent to own, rent to buy agreement.

consumer price index (CPI)

Records the change in purchasing power by measuring changes, over time, in the weighted average price of consumer goods and services such as food, transport and medical care. It represents consumption expenditure by households in Australian metropolitan areas.

contracts for difference (CFD)

A contract between a seller and a buyer who are effectively betting on the short-term movements in the price of shares or other traded investments. The gain or loss is the difference between the price of the asset when the contract was made and the price in the future when the contract is closed out. If the price increases, the seller pays the buyer. If the share price decreases, the buyer pays the seller. Contracts are usually made with borrowed money (leveraged) which can magnify gains or losses.

cooling-off period

A period of time in which you can get out of a contract for the purchase of goods or services, if you change your mind. The rules on cooling-off periods vary between states and territories. Details of a cooling-off period will be included in the contract, if the good or service has one.

corporate bond

A debt security issued by a company to investors to raise money to finance its business activities. Sometime called fixed-income securities because the issuer promises to pay a specific amount of interest on a regular basis and repay the principle on a set date.

coupon rate

The annual interest rate on a bond, paid by a bond issuer, relative to the face value of the bond. 

credit card

A plastic card that gives you access to money the bank has agreed to lend you for a certain period of time. See also interest-free period on credit cards.

credit contract

A document that contains the details of a loan, including the term, interest rate, fees and charges, and repayments. Credit providers must provide you with a credit contract.

credit file

A file kept by a credit reporting agency that shows your credit history. Lenders access the information in your file to help them decide whether to lend to you. They can also record a default on your file if you make loan repayments late, or don't pay a utility bill. Every time you make an application for finance an entry is recorded on your file showing the lender you applied to, the type of finance, the amount and the date. See also credit report and credit rating.

credit guide

Anyone engaging in credit activities (for example, by providing credit or credit assistance to you) must give you a credit guide. A credit guide will contain information about the lender, such as their licence number and external dispute resolution (EDR) scheme membership. It will also include the sort of costs you might pay if you take a loan from the lender.

credit limit

The maximum amount a bank will lend you under a loan or a credit contract.

credit rating

An assessment of the credit-worthiness of individuals and corporations, based on their borrowing and repayment history.

credit report (credit reference)

A report that details your credit history, including every time you have applied for credit or defaulted on a repayment. It is held by a credit reporting agency and a lender must ask you for permission to get this report. See also credit file.

credit reporting agency

An organisation that collects and sells credit information on individuals and companies.

credit union

Community-based financial institution owned by its members that offers traditional banking services like savings accounts and loans, listed on the APRA website as a credit union.  See also building society.

creditor

A person to whom you owe money.

Critical Information Summary (CIS)

A document supplied by a telecommunications provider that contains information about what you will pay and what you will get for your money. The information is presented in the same way so you can easily compare one provider's price and service with others.

currency risk

The risk that the value of your investments will be affected by changes in foreign currency exchange rates.

 


Last updated: 30 Jul 2015