For many years I struggled to understand the lingo used in movies and books that came from the US with regard to money and finance. Here are a few terms that you are most likely to encounter that have no real parallel here in Europe.
If you need me to explain anything else just leave a comment and I’ll do my best.
Credit Score
In the US, having a good credit score or credit rating is of utmost importance. The credit score was invented by a private company called FICO (Fair, Isaac and Company). It was founded by an engineer and a mathematician working at Stanford in the 1950s in order to counter the credit crisis of those times. The aim was to quantify how reliable a person asking for a loan really was. It is now used in the US, Canada and Mexico.
There is no such parallel system in Europe. When you ask for a loan from the bank in Europe, they will ask for the typical papers such as whether you own any property, your monthly payslips, etc. and then make a decision based on that documentation.
Credit Card Points and Rewards
While in the US credit cards are super popular and it is common for individuals to own several cards and be maxing them out, in Europe a lot of people don’t even have a credit card. Instead, they use a debit card.
The European Union actually limits the rewards given on credit cards to around 0.3%. The money for cashbacks and rewards for US credit cards needs to be recouped from somewhere, and it is mostly obtained from the commissions that credit card companies charge to businesses for processing the payments (2% plus per transaction). Another important source of money is the extremely high-interest rates paid by those who cannot settle their credit card at the end of the month.
No wonder many end up declaring bankruptcy. At the end of the day, the net effect is that products are marked up by stores i norder to compensate for the credit card fees, while many people with low financial acumen end up in debt and social problems.
401K
This is a retirement scheme mechanism in the US that is what we would call a private pension in Europe, where both the employer and the employee can contribute and get some tax benefits. This does not exist in Europe in any country as far as I know, although the UK might have something similar.