Financial jargon can be confusing. Brush up on your personal finance know-how with this list of banking terms.
The total amount of all funds in your account.
A rate of interest that can vary during the term of the loan. Commonly used in reference to mortgages, credit cards and student loans.
Annual percentage rate (APR)
The interest rate and fees or additional costs you’re charged per year for a loan or credit card. As a customer, the lower the APR, the better.
Annual percentage yield (APY)
The effective annual rate of return taking into account the compounding of interest on a savings, checking, CD or money market account. In this case, the higher the APY, the better.
Any personal possessions of value. This also includes cash, real estate and investments.
Fees you’re charged for using an out-of-network ATM or exceeding a certain number of ATM transactions for your account, if limited.
A loan for the purchase of a vehicle you pay off over time. This is more expensive than buying a car outright because you’re paying interest, but you also get to use the car while you’re paying for it.
Automated clearinghouse (ACH)
The electronic network used to transfer money between accounts at different institutions.
Automated Teller Machine (ATM) card
A card that gives you access to your account through an ATM. If it’s a debit card, it will also work at retailers.
The amount of funds in your account ready for immediate withdrawal.
The payment required on a credit card or home equity line of credit (HELOC) by a specific date. It may include a past-due balance or fees.
Certificate of deposit (CD)
A savings product used to lock in a fixed APY on deposits for a set period, until the maturity date. CDs usually pay higher interest than a savings account. Customers must keep the money in for the time period to get the APY or there is a penalty.
The basic account for easy access to your money. Helpful for managing day-to-day expenses and recurring (monthly) bills.
One of the most popular forms of credit, a card that allows you to spend up to a specific limit. Interest on the balance is assessed at the end of the monthly term, so to avoid paying interest, you’ll want to pay off your full balance each month.
The maximum amount you’re allowed to charge on a credit card or HELOC.
An evaluation of creditworthiness based on financial resources and credit history. Strictly speaking, ratings are usually applied to businesses or governments and expressed as a letter grade (A, B+, etc.).
In contrast to a credit rating, the credit score is a number (600, 700, etc.) indicating an individual’s creditworthiness. Credit bureaus look at factors such as your total debt, number of open accounts, available credit and whether you rent or own your home. A good credit score can result in a lower interest rate for loans.
The amount of funds in your account, including any pending activity.
A decrease in a savings or checking account, such as a withdrawal or a check written against the account.
An ATM card that allows you to pay for goods at stores or businesses, online and at ATMs. A debit card draws the money from your checking account, in contrast to a credit card which borrows money you have to pay back.
Funds added to your account.
An automatic deposit to your account made by your employer or an outside agency (such as a pension or government benefit payment). These are usually recurring and spare you the hassle of depositing a paper check. Online transfers are not considered direct deposits.
Early withdrawal penalty
A fee for withdrawing funds from an account — or closing it — before its maturity date. This applies to both CDs and individual retirement accounts (IRAs).
Electronic bills that are delivered directly to your online banking account for payment instead of mailed to your home.
Electronic Funds Transfer (EFT)
The transfer of money between accounts through ATMs or electronic payment systems.
Equal Credit Opportunity Act
A federal law that prohibits discrimination in credit transactions on the basis of race, color, religion, national origin, sex, marital status, age, source of income or the exercise of any right under the Consumer Credit Protection Act.
Accounts owned at another financial institution.
Federal Deposit Insurance Corporation (FDIC)
An independent agency of the U.S. government that insures bank and thrift institution deposits of up to $250,000 per depositor, in the event of a bank’s failure.
A rate of interest that doesn’t vary for the entire term of the loan or deposit.
Home Equity Line of Credit (HELOC)
A line of credit based on the estimated value of your home or on the amount of equity in your home.
Home equity loan
A type of loan that uses the equity of your home as collateral. Typically, a home equity loan allows you to borrow a one-time lump-sum amount of money equal to or less than the equity you have in your home.
An account balance too low to cover a check presented for payment. Sometimes abbreviated as NSF for “non-sufficient funds.”
The cost of borrowing money or the amount earned on a deposit account. To calculate simple interest, multiply the original amount (of your savings or your loan) by the interest rate. For compound interest, the interest is added to the total amount as it accumulates.
Your earnings on savings accounts, certificates of deposit and money markets. Banks or other organizations or individuals who pay interest usually report it on Form 1099-INT.
The annual percentage paid on an interest-bearing savings account or CD or the interest charged on loans. The interest paid on a deposit account is the “annual percentage yield” (APY) and the rate charged on a loan is the “annual percentage rate” (APR).
A process that allows interest earned on one account to be transferred to another account. For example, the interest earned on a CD can be transferred to a money market account.
A bank account held in more than one name. Each person on the account has equal ownership. The primary account holder receives the bank statements and any other correspondence.
For loans, the date that the full balance is due. For CDs, the date the CD funds are available for withdrawal or renewal with interest paid.
The amount your average balance in a deposit account must stay above to avoid fees.
Money market account
A high-yield savings account that’s FDIC-insured up to $250,000 per depositor. In contrast to a CD, with a money market account, you still have regular access to your funds.
A loan used to purchase or refinance a home or real property, with payments usually spread over 10 to 30 years. It’s secured by real estate, such as the borrower’s primary residence.
Non-sufficient funds (NSF)
An account balance too low to cover a check presented for payment.
An arrangement made between you and your bank that allows you to withdraw more than the balance in your account without incurring any penalties.
A person or business to whom a check is written.
The interest rate over a specific period of time. A monthly periodic rate is the cost of credit per month. A daily periodic rate is the cost of credit per day.
Personal identification number (PIN)
A number issued with your debit or credit card so you can withdraw money from ATMs or conduct other account-related activity. To help prevent fraud, a PIN should be memorized, never written down or disclosed to anyone else.
The interest rate that banks use to establish the indexed rate for certain loan products. The prime rate is published in The Wall Street Journal.
The first nine numbers that appear at the bottom of a check to identify the financial institution responsible for holding the account.
An interest-bearing deposit account used for storing money, like an emergency fund.
Moving money from one account to another on a regular recurring basis, often monthly.
A charge for a service or a penalty for not meeting certain requirements, such as insufficient funds in a checking account.
Interest computed only on the principal balance, without compounding.
An amount charged by the owner of an ATM. This generally applies to out-of-network ATMs.
The time to the maturity of a loan or deposit. For example, a CD can have a term from 3 to 60 months.
The current worth of an account, including funds on hold or pending approval.
An interest rate that may fluctuate during the term of a loan, line of credit or deposit account. The new rate is sometimes determined by The Wall Street Journal prime rate. See also “adjustable rate”.
An electronic payment service for transferring funds by wire. Wire transfers are guaranteed funds for the recipient, meaning the payment cannot be revoked by the sender after the transfer.
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