Rates and Fees
This section is designed to help explain the different rates and fees, frequent terminology used in the financial services industry, and discuss the Campus Federal rate schedule. As you've heard us say, Campus Federal strives to be your trusted financial partner and we hope this section explains any questions you may have.
Learn more about Interest rates
Interest rates play an important role in our financial lives and our financial decision - making. Having a better understanding of what different rates mean can help you make better decisions. Everyone wants to earn the highest returns on their money and pay the lowest rates on their borrowing. While it sounds simple, be sure to review all the terms of any savings and borrowing to make sure you understand all the details.
Here are some definitions and explanations to help you understand what the different rates mean:
- Prime rate - This is the often-quoted rate that many banks charge large customers for borrowing. However, many consumer borrowing tools, such as credit cards, charge interest rates that are tied to the prime rate. This rate changes only periodically, however when the Federal Reserve raises or lower rates, this is one of the first to change.
- Long-term government bond rate - This is the rate quoted for 10-year U.S. Government Bonds. It represents what someone would earn if they bought one of these bonds in the open market. There is a very active market for these instruments and the rate changes daily (even minute to minute) as investors and dealers buy and sell these bonds.
- Annual Percentage Yield (APY) - This term is used to identify the rate you earn when making a deposit in a checking account, savings account or certificate of deposit. It usually includes a monthly compounding factor.
- Annual Percentage Rate (APR) - This is the rate you pay when borrowing money. It takes into account all of the costs of borrowing such as points with a mortgage, or lower rates for an initial period and higher rates later in the life of the loan. APR is the most important figure to consider when borrowing money. It is the best way to get a true comparison of different borrowing alternatives.
- Dividend yield - This merely represents the return you would get from dividends of owning a stock. For example, if a share of stock pays a $2 dividend and the share costs $50, the dividend yield is 4%.
- Total return - This term describes the entire return you get from an investment. It includes dividends and changes in the price of the underlying investment. Using the stock example quoted above, if that same $50 stock continues to pay a $2 dividend, but also increases to $55 in the course of a year, your total return would have been $7 or 14%. Conversely, if the value of that same share drops to $45, your total return would be a negative $3 or - 6%.
- Time weighted internal rate of return - This measure is like "total return," but also takes into account the timing of any cash flows and assumes the cash flows are reinvested into the same investment. It can be a complicated calculation and is best used to measure returns from a total portfolio. It is the method used by mutual funds to describe their results. This website has a "Portfolio Rate of Return Calculator" in the Reference Section for your use.
If you still have questions after reviewing the contents in this section, please contact us.