Glossary
A
Account
A depository or credit relationship between a customer and a financial institution that includes checking, savings, credit or money market agreements.
Accounthistory
The transaction history of an account over a specified period.
Account number
The unique number given to your current account. You'll find it on your bank statements and printed as the last group of computer-type figures at the bottom of your checks.
Annual percentage rate (APR)
The cost of credit expressed as an annual rate.
ATM fees
Charges assessed by your bank, either by exceeding the transaction limit set by the financial institution based on your account type or as a convenience charge from a bank not associated with the person using the machine.
Automated clearing house (ACH)
The networks used as a means to transfer money electronically between accounts at different institutions, usually in one day.
Available balance
The portion of a customer's account balance on which the bank has placed no restrictions, making it available for immediate withdrawals.
B
Balance
The amount of money in your current account. It makes for happy reading when it's a positive figure.
Balance due
That dollar amount representing the sum of the previous balance due plus cash advances and merchandise purchases for the billing period less credit for payments and/or merchandise returned plus any appropriate finance charge.
Bank debits
The sum of all checks and other instruments charged against the deposited funds of a bank's customers.
Bank identification
A series of digits used to identify a particular bank.
Bankrupt
The quality of a person, corporation or other legal entity who, being unable to meet his or her financial obligations, must relinquish his or her property to a receiver or trustee for administration and distribution to creditor.
C
Check clearing
You write a check to pay your telephone bill. The telephone company sends the check to its bank to be deposited in its account. The check winds its way through the system and, eventually, your account is debited for the amount of the check. When that happens, the check is said to have "cleared."
Credit
Increases in an account (such as a deposit made to the account).
Credit card
A plastic card issued to an individual for the purpose of purchasing goods and services using credit; a credit limit is established for each card holder.
Credit line
The maximum amount of money available in an open-end credit arrangement such as a credit card.
Credit rating
For individuals, credit rating is based on your financial resources and credit history. Your total debt level compared to your income level, timeliness in paying bills, number of credit cards and many other factors are taken into consideration. Credit bureaus use credit scoring to quantify to potential creditors how likely you are to pay back a loan. Consumers can obtain a copy of their credit reports from TransUnion, Experian or Equifax.
Credit score
A number that indicates an individual's creditworthiness. Credit bureaus determine the score with a statistical program. You are given points for such things as your credit card debt, number of cards, total debt level, and whether you rent or own your home. Even the number of inquiries from potential creditors can affect your score because a high number of inquiries may signal credit problems. Creditors use the score to decide whether to give you a mortgage, issue a credit card or offer a small business loan. A good score can result in a lower interest rate; a poor score can result in a higher interest rate or loan denial.
D
Debit
Decreases in an account, such as that which occurs when a check is written against that account.
Debit card
A card that allows you to pay for goods in shops and withdraw money at ATMs. Unlike a credit card, which builds up a balance that you should pay off each month, a debit card takes the money from your current account when you spend
Dependent
A person who is dependent for support upon another, to be distinguished from one who merely derives a benefit from the earnings of another.
Deposit
The process of paying cash and checks into your account.
Direct deposit
Electronic deposit of wages or benefits, such as pension or social security, into a personal bank account; deposits are handled through the automated clearinghouse (ACH).
E
Early withdrawal penalty
A depositor forfeits interest or is assessed a service charge for withdrawing funds from or closing out a time deposit before its maturity date.
Electronic Funds Transfer (EFT)
Electronic Funds Transfer. The transfer of money between accounts by consumer electronic systems such as automated teller machines (ATMs) and electronic payment of bills.
Extension of credit
The granting of credit in any form.
F
Fixed rate
A rate of interest that does not vary for the term of the loan or deposit.
Float
The amount of time the bank takes to clear or reject (bounce) a check for payment; the time at which funds are debited from the issuer's account.
Full payment
The amount of money owed on a single account that, if paid, will reduce the account to a zero balance.
G
Good faith
A standard of conduct between parties meaning honesty in fact in the conduct of the transaction. As an element of a defense to violations under several statues, a good faith effort to comply means that the creditor did not know about the violation and took reasonable steps to avoid it.
H
High balance
Refers to account upon which the outstanding balance exceeds the authorized credit limit.
I
Insufficient funds
A term indicating that an account balance in inadequate to cover a check that has been written and presented for payment.
Interest
The cost for borrowing a sum of money, or the amount earned on an interest-bearing deposit account, usually calculated at a percentage rate over a period of time. For example, if you borrow $1,000 for a year at an annual interest rate of 10%, you would pay $100 in interest for a year's use of the money.
Interest income
Earnings on investments such as savings accounts, certificates of deposit and money markets. Banks or other organizations or individuals who pay interest usually report it on Form 1099-INT.
Interest rate
The annual rate paid on an interest-bearing account, such as a savings and CDs, which does not reflect compounding. Different types of accounts pay or charge different rates of interest. The interest paid on an interest-bearing account is usually expressed as an Annual Percentage Yield. The rate charged on a loan is usually expressed as an Annual Percentage Rate.
J
Joint account
A bank account held in more than one name, usually by a married couple or partners living at the same address.
L
Late payment fee
Charge imposed on a debtor for not paying on time.
M
Maturity
The date on which the principal balance of a loan becomes due and payable. It also marks the date when a bond pays its principal.
Mortgage loan
A consumer loan secured by residential real estate, usually the borrower's primary residence. May be used to purchase or refinance a home or property, with payments usually spread over 15 to 30 years.
O
Overdraft protection
An arrangement made between you and your bank that allows you to withdraw more than the amount of money in your account.
P
Periodic rate
The interest rate described in relation to a specific amount of time. The monthly periodic rate, for example, is the cost of credit per month; the daily periodic rate is the cost of credit per day.
Prime rate
A common benchmark for consumer and business loans set by banks, usually at a level 3 percentage points higher than the Fed Funds rate. The rate given to consumers on their loans is often determined as the prime rate plus a certain percentage, which represents the lender's assessment of the risk in lending, plus its profit margin.
R
Routing number
The first nine numbers that appear at the bottom of a check to identify the financial institution from which funds may be drawn.
S
Service charge
Fees charged to customers for specific services or as a penalty for not meeting certain requirements such as insufficient funds in a checking account. Returned or "bounced" check charge. Also referred to as an NSF or non-sufficient funds fee. The amount of money charged to an account holder whose account has insufficient funds available to pay the check, which is returned to the party who cashed it unpaid. (The bank did not advance the funds to cover check.)
Simple interest
Interest computed only on the principal balance, without compounding.
Statement
A detailed record of transactions in a bank customer's account(s) for a certain period, usually each month, which shows debits, credits, transfers, payroll deposits, account balance, check fees, service charges, ATM activity, etc.
Surcharge
An extra cost assessed by the owner of the ATM, associated with using a service, such as an out-of-network ATM. The amount of the surcharge is set by the ATM owner.
T
Term
The time to the maturity of a loan or deposit, expressed in months or years.
U
Uncollected funds
Refers to items deposited in an account that have not yet been collected, or paid, by the bank on which they were drawn.
V
Variable rate
An interest rate that may fluctuate during the term of a loan, line of credit or deposit account, according to changes in an index rate, such as the prime rate or other prescribed criteria.
Visa/PLUS
An interbank network that covers all Visa credit, debit, and prepaid cards, as well as ATM cards issued by various banks worldwide. Currently, there are 1 million PLUS-linked ATMs in 160 countries worldwide.
W
Wire transfer
An electronic payment service for transferring funds by wire. These transfers may be conducted through the Federal Reserve Wire Network or the Clearing House Inter-bank Payments System, among others. Wire transfers are guaranteed funds for the recipient, meaning that the payment cannot be revoked by the sender after the transfer.