Glossary of Terms
You'll hear a lot of jargon in the banking industry. Here are definitions to some
of the terms we use often. If you'd like to know more about any item, just ask us.
Automated Clearing House (ACH) A computer-based
system for processing deposits and payments electronically.
Annual Percentage Rate (APR) The cost of borrowing
money or the interest paid on deposit accounts, expressed as a percentage per year.
Includes certain fees.
Annual Percentage Yield (APY) The amount of
interest earned on a deposit account (such as a CD or IRA), including the effect
of interest compounding, assuming funds remain in the account for one year.
Average Balance The average amount in a deposit
account that equals the sum of the daily balances during an accounting period, usually
a month, divided by the number of days in the period. Maintaining a certain average
balance can sometimes be used to avoid service charges or to qualify for special
services. See also: Minimum daily balance.
Automatic Payment An arrangement that authorizes
payments to be deducted automatically from a bank account (usually checking or savings)
to pay bills (such as insurance payments, rent, mortgage or loan payments). Payments
are usually scheduled to be made on a certain day of the month.
Automatic Transfer An arrangement that moves
funds from one account to another automatically on a pre-arranged schedule; for
example, every payday or once a month.
Certificate of Deposit (CD) A time deposit with
a maturity date that generally pays higher interest rates than other types of deposit
accounts. Maturities can range from a few weeks to several years. Insured by the
FDIC up to the maximum allowed by law. A penalty may be assessed if funds are withdrawn
before the maturity date.
Check Safekeeping A service that authorizes
the bank to keep copies of canceled checks instead of returning them with a statement.
Photocopies of checks are available upon request.
Collected Balance The balance in a deposit account,
not including deposited items that have not yet been paid, or collected. This balance
may be used to calculate interest payments, avoid monthly maintenance fees, etc.
See also: Ledger balance.
Compounding Interest added to interest previously
earned on a principal balance. The more frequently interest is compounded, the higher
the effective yield.
Credit A financial term that refers to an increase
in a deposit account (such as a deposit made to the account). See also: Debit.
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. Debit A financial term that refers to a decrease
in a deposit account, such as writing a check against the account. See also: Credit.
Debit A financial term that refers to a decrease in a
deposit account, such as writing a check against the account. See also: Credit.
Direct Deposit Electronic deposit of wages or
benefits, such as pension or social security, into a personal bank account. See
Fixed Rate A rate of interest charged for a
loan or paid to an interest-bearing deposit account that does not vary for the term
of the loan or deposit. See also: Variable rate.
Home Equity Line of Credit A line of credit
secured by the equity in a home. Can be used for home improvements, debt consolidation
and other major purchases and expenses. Interest paid on the loan is generally tax
deductible (consult a tax adviser to be sure). Upon approval, a credit line limit
is established. In most cases, the borrower can tap into the credit line by writing
line of credit checks or getting a cash advance.
Interest Rate The rate paid on an interest-bearing
account, such as savings and some checking accounts. Also, the rate charged
on a loan or line of credit. Different types of accounts and loans pay or charge
different rates of interest.
Interest Transfer A process that allows interest earned in one account to be transferred to another account. For example, interest earned on a CD can be automatically transferred to a designated checking account.
Ledger Balance The balance in an account at
the beginning of each day, also known as the current balance. Includes all deposits
and withdrawals that were posted from the previous night, whether or not funds have
been collected. See also: Collected balance.
Minimum Daily Balance The minimum amount that
may be required to be kept in an account each day to earn interest, avoid a service
charge or qualify for special services. See also: Average balance.
Nonsufficient or Insufficient Funds (NSF) A
situation in which a check (or other type of withdrawal) may not be paid because
the balance in the account is less than the amount of the check. See also: Overdraft.
Online Banking A service that allows an account
holder to obtain account information and manage certain banking transactions through
a personal computer.
Overdraft When the amount of a paid check or
other withdrawal exceeds the available balance in a checking account. See also:
NSF and overdraft protection.
Overdraft Protection A service that allows a
checking account to be linked to a line of credit to provide protection against
returned items or overdrafts.
Transaction Limitations If you are transferring from
a savings or money market account, please be aware that federal regulation limits telephone
transfers to checking, Internet transfers, ACH payments, automatic sweeps, internet bill
payments, wire transfers (if not in person), and point-of-sale (check card) purchases from
savings and money market accounts to six per monthly statement cycle. If you exceed this
limitation on more than an occasional basis, either in number or in frequency, or if you
exceed this limitation willfully, the Bank will be required by regulation either to (1)
revoke your ability to make those types of withdrawals, (2) close the account, or (3) change
it to another type of account that allows unlimited withdrawals
Uncollected Funds Refers to items deposited
in an account that have not yet been collected, or paid, by the bank on which they
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. See also: Fixed rate.
VISA® Check Card A plastic card issued by a bank
which customers can use to pay for purchases anywhere VISA® is accepted. Money is
immediately deducted from a designated checking account. Can also be used at ATM.
Sometimes referred to as a debit card.
Wire Transfer An electronic payment service
for transferring funds from an account in one bank to an account at another bank.