Banking
Terms:
Account Holder:
Any person designated and authorized to transact
business on behalf of an account. Each account holder's signature needs to be
on file with the bank. The signature authorizes that person to conduct business
on behalf of the account.
Affidavit:
A sworn statement in writing before a proper
official, such as a notary public.
Annual Percentage Rate (APR):
The cost of credit on a yearly basis, expressed as
a percentage.
Application:
An oral or written request for an extension of
credit that is made in accordance with the procedures established by a creditor
for the type of credit requested.
Appraisal:
The act of evaluating and setting the value of a
specific piece of personal or real property.
Automated Teller Machine (ATM):
A machine, activated by a magnetically encoded card
or other medium, that can process a variety of banking transactions. These
include accepting deposits and loan payments, providing withdrawals, and
transferring funds between accounts.
Automatic Bill Payment:
A checkless system for paying recurring bills with
one authorization statement to a financial institution. For example, the
customer would only have to provide one authorization form/letter/document to
pay the cable bill each month. The necessary debits and credits are made
through an Automated Clearing House (ACH).
Available Balance:
The balance of an account less any hold,
uncollected funds, and restrictions against the account.
Balance Transfer:
The process of moving an outstanding balance from
one credit card to another. This is usually done to obtain a lower interest
rate on the outstanding balance. Transfers are sometimes subjected to a Balance
Transfer Fee.
Bank Statement:
Periodically the bank provides a statement of a
customer's deposit account. It shows all deposits made, all checks paid, and
other debits posted during the period (usually one month), as well as the
current balance.
Business Day:
Any day on which offices of a bank are open to the
public for carrying on substantially all of the bank's business.
Cashier's Check:
A check drawn on the funds of the bank, not against
the funds in a depositor's account. However, the depositor paid for the
cashier's check with funds from their account. The primary benefit of a
cashier's check is that the recipient of the check is assured that the funds
are available.
Certificate of Deposit:
A negotiable instrument issued by a bank in
exchange for funds, usually bearing interest, deposited with the bank.
Check:
A written order instructing a financial institution
to pay immediately on demand a specified amount of money from the check
writer's account to the person named on the check or, if a specific person is
not named, to whoever bears the check to the institution for payment.
Check Truncation:
The conversion of data on a check into an
electronic image after a check enters the processing system. Check truncation
eliminates the need to return canceled checks to customers.
Checking Account:
A demand deposit account subject to withdrawal of
funds by check.
Co-Maker:
A person who signs a note to guarantee a loan made
to another person and is jointly liable with the maker for repayment of the
loan. (Also known as a Co-signer.)
Credit Life Insurance:
A type of life insurance that helps repay a loan if
you should die before the loan is fully repaid. This is optional coverage.
Credit Limit:
The maximum amount of credit that is available on a
credit card or other line of credit account.
Debit:
A debit may be an account entry representing money
you owe a lender or money that has been taken from your deposit account.
Debit Card:
A debit card allows the account owner to access
their funds electronically. Debit cards may be used to obtain cash from
automated teller machines or purchase goods or services using point-of-sale
systems. The use of a debit card involves immediate debiting and crediting of
consumers' accounts.
Demand Deposit:
A deposit of funds that can be withdrawn without
any advance notice.
Draft:
A signed, written order by which one party (the
drawer) instructs another party (the drawee) to pay a specified sum to a third
party (the payee), at sight or at a specific date. Typical bank drafts are
negotiable instruments and are similar in many ways to checks.
Drawee:
The person (or bank) who is expected to pay a check
or draft when it is presented for payment.
Drawee bank:
The bank upon which a check is drawn.
Drawer:
The person who writes a check or draft instructing
the drawee to pay someone else.
Electronic Banking:
A service that allows an account holder to obtain account information and manage certain banking transactions through a personal computer via the financial institution's Web site on the Internet. (This is also known as Internet or online banking.)
Electronic Funds Transfer (EFT):
The transfer of money between accounts by consumer electronic systems-such as automated teller machines (ATMs) and electronic payment of bills-rather than by check or cash. (Wire transfers, checks, drafts, and paper instruments do not fall into this category.)
First Mortgage:
A real estate loan which is in a first lien position, taking priority over all other liens. In case of a foreclosure, the first mortgage will be repaid before any other mortgages.
Fixed Rate Loan:
The interest rate and the payment remain the same over the life of the loan. The consumer makes equal monthly payments of principal and interest until the debt is paid in full.
Fixed Rate Mortgage:
A mortgage with payments that remain the same
throughout the life of the loan because the interest rate and other terms are
fixed and do not change.
Float:
The amount of uncollected funds represented by
checks in the possession of one bank but drawn on other banks
Foreign Transaction Fees:
A fee assessed by your bank for making a
transaction at another bank's ATM.
Forged Check:
A check on which the drawer's signature has been
forged.
Forgery:
The fraudulent signing or alteration of another's
name to an instrument such as a deed, mortgage, or check. The intent of the
forgery is to deceive or defraud.
Guarantor:
A party who agrees to be responsible for the
payment of another party's debts should that party default.
Home Equity Loan:
A home equity loan allows you to tap into your
home's built-up equity, which is the difference between the amount that your
home could be sold for and the amount that you still owe.
Inactive Account:
An account that has little or no activity; neither
deposits nor withdrawals having been posted to the account for a significant
period of time.
Individual Account:
An account in the name of one individual.
Insufficient Funds:
When a depositor's checking account balance is
inadequate to pay a check presented for payment.
Interest:
The term interest is used to describe the cost of
using money, a right, share, or title in property.
Joint Account:
An account owned by two or more persons. Either
party can conduct transactions separately or together as set forth in the
deposit account contract.
Lender:
An individual or financial institution that lends
money with the expectation that the money will be returned with interest.
Line of Credit:
A pre-approved loan authorization with a specific
borrowing limit based on creditworthiness. A line of credit allows borrowers to
obtain a number of loans without re-applying each time as long as the total of
borrowed funds does not exceed the credit limit.
Loan Fee:
A fee charged by a lender to make a loan (in
addition to the interest charged to the borrower).
Local Check:
A check payable by, at, or through a bank in the
same check processing region as the location of the branch of the depository
bank. The depository bank is the bank into which the check was
deposited.:
Maturity:
The date on which the principal balance of a loan,
bond, or other financial instrument becomes due and payable.
Minimum Balance:
The amount of money required to be on deposit in an
account to qualify the depositor for special services or to waive a service
charge.
Minimum Payment:
The minimum dollar amount that must be paid each
month on a loan, line of credit, or other debt.
Missing Payment:
A payment that has been made but not credited to
the appropriate account.
Mortgage:
A debt instrument used in a real estate transaction
where the property is the collateral for the loan. A mortgage gives the lender
a right to take possession of the property if the borrower fails to pay off the
loan.
Mortgage Loan:
A loan made by a lender to a borrower for the
financing of real property.
Mortgagee:
The lender in a mortgage loan relationship.
Mortgagor:
The borrower in a mortgage loan relationship.
(Property is used as collateral to make payment.)
Mutual Fund:
A fund operated by an investment company that
raises money from shareholders and invests it in stocks, bonds, options,
commodities, or money market securities. These funds offer investors the
advantages of diversification and professional management.
Official Check:
A check drawn on a bank and signed by an authorized
bank official. (Also known as a cashier's check.)
Online Banking:
A service that allows an account holder to obtain
account information and manage certain banking transactions through a personal
computer via the financial institution's web site on the Internet. (This is
also known as Internet or electronic banking.)
Outstanding Check:
A check written by a depositor that has not yet
been presented for payment to or paid by the depositor's bank.
Overdraft:
When the amount of money withdrawn from a bank
account is greater than the amount actually available in the account, the
excess is known as an overdraft, and the account is said to be overdrawn.
Overdraw:
To write a check for an amount that exceeds the
amount on deposit in the account.
Overlimit:
An open-end credit account in which the assigned
dollar limit has been exceeded.
Passbook:
A book in ledger form in which are recorded all
deposits, withdrawals, and earnings of a customer's savings account.
Payee:
The person or organization to whom a check, draft,
or note is made payable.
Paying (Payor) Bank :
A bank upon which a check is drawn and that pays a
check or other draft.
Payment Due Date:
The date on which a loan or installment payment is
due. It is set by a financial institution. Any payment received after this date
is considered late; fees and penalties can be assessed.
Payoff:
The complete repayment of a loan, including principal,
interest, and any other amounts due. Payoff occurs either over the full term of
the loan or through prepayments.
Personal Identification Number (PIN):
Generally a four-character number or word, the PIN
is the secret code given to credit or debit cardholders enabling them to access
their accounts. The code is either randomly assigned by the bank or selected by
the customer. It is intended to prevent unauthorized use of the card while
accessing a financial service terminal.
Prepayment:
The payment of a debt before it actually becomes
due.
Refund:
An amount paid back because of an overpayment or
because of the return of an item previously sold.
Renewal:
A form of extending an unpaid loan in which the
borrower's remaining unpaid loan balance is carried over (renewed) into a new
loan at the beginning of the next financing period.
Statement:
A summary of all transactions that occurred over
the preceding month and could be associated with a deposit account or a credit
card account.
Stop Payment:
An order not to pay a check that has been issued
but not yet cashed. If requested soon enough, the check will not be debited
from the payer's account. Most banks charge a fee for this service.
Terms:
The period of time and the interest rate arranged
between creditor and debtor to repay a loan.
Time Certificate of Deposit:
A time deposit evidenced by a negotiable or
nonnegotiable instrument specifying an amount and maturity.
Uncollected Funds:
A portion of a deposit balance that has not yet
been collected by the depository bank.
Wire Transfer:
A transfer
of funds from one point to another by wire or network such the Federal Reserve
Wire Network (also known as Fed Wire).
