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Your needs or those of your family will be met by specific products tailored to your specific needs. All programs require the completion of a brief application. The applications vary slightly from program to program, but all ask for some personal background information.

Credit history is the record of debt repayment that shows how much a person is responsible for repaying the debts. The original amount of a loan or investment is called the Principal. A social security number is a 9-digit number assigned by the US government to its citizens and permanent residents. This number is used to keep the track of their lifetime earnings and the number of working years. Payroll deduction refers to the wages deducted from an employee’s total earnings to pay for taxes and benefits like health insurance, etc. Where “r” is the rate of annual interest and “n” is the number of compounding periods in one year.

Security deposit is the amount of money a renter pays to a landlord, seller, or the lender of a real estate like a home or an apartment before moving in. Where ‘A’ is the final total amount, ‘P’ is the initial principal amount, ‘r’ is the rate of interest, n denotes how many times interest is applied, and ‘t’ denotes the periods of time. Compound interest is the interest added to the principal amount of a deposit or loan. It is also calculated on the basis of the initial principal amount and the amount of interest added to the principal amount over the previous periods. Equity is defined as the value that will be returned to the shareholders of a company if all of its assets are sold out, and all of its debts are cleared.

An open mortgage is a mortgage or loan that can be fully repaid at any time without any penalty. It can be renegotiated and does not have a strict schedule. essential banking terms you need to know Open mortgages have a higher interest rate than closed mortgages. An amortization period is the total time taken to pay a bank loan in full.

  1. Banking is full of terms and concepts that can be difficult to comprehend.
  2. Secured loan—A secured loan is a loan that is guaranteed by collateral or financial assets, such as a bank account or property, which ensures the lender that they will be repaid.
  3. The data presented in the article was current as of the time of writing.
  4. With compound interest, you earn money not only on the principal, but on the interest it earns, too.

A stop payment order cancels a check, meaning it cannot be processed and no funds will be withdrawn from your account. However, stop payment orders only work if you promptly contact your bank, which will charge a fee (usually around $30) for canceling the check. If your account doesn’t have sufficient funds to make a requested payment, you may be charged an overdraft fee as a result of your financial institution paying the lacking amount. Bank Statement – a bank-provided listing of the account balance as of a specified date and all activity into and out of the account for a specified time period, usually monthly. It is important to review the bank statement to check for errors and signs fraudulent activity. Broker—Someone who acts as an intermediary between buyer and seller.

Today, we’ll describe exactly what banks are talking about when they say “personal banking,” and we’ll explain why it matters to you. My name is Pachalo and I’m the author/owner of Investadisor.I’m an extreme personal finance enthusiast and have been working in the financial industry for over a decade. The blog was started to further explore, learn, improve and share personal finance knowledge with the world.

Banking 101: Glossary of Banking Terms

A government-run organization that insures customers’ bank deposits up to $250,000 if the bank fails. The National Credit Union Administration is the equivalent for credit unions. Understanding key banking terms is an important part of making decisions about everything from choosing a credit card to buying or renovating a home. These 10 terms and acronyms are commonly used in banking and learning what they mean can help you become more confident when making financial decisions. The amount of money you have in your bank account that is available to spend or withdraw. If you have recently deposited a check or made purchases, those transactions may still be marked as pending and may not be included in your available balance.

Checking and Savings

Non-compounding interest would continue to earn 5% on $100. When you’re dealing with your finances, unfamiliar words and acronyms can make complicated processes even more confusing. Here’s a quick guide to help you navigate banking terms. For example, if you put $100 in an account that earns compound interest at 5% a year, in the next year you will earn 5% on $105. Noncompounding interest would continue to earn 5% on $100.

It is usually required if you take out a mortgage from a lender and make a down payment of less than 20 percent of the home’s purchase price. Or if you’re refinancing and your equity is less than 20 percent of the value of your home. Like other kinds of mortgage insurance, PMI protects the lender if you stop making payments on your loan. Many banks have strong protections against fraudulent transactions. If a suspicious transaction occurs on your account, your bank may prevent the payment from going through until they talk with you to confirm that the purchase is valid.

How to Improve Your Banking Vocabulary

A credit report or credit bureau report is the summary of a person’s credit history (loan repaying history) prepared by the credit bureau. Typically, an interest-bearing account used to hold money for short- or long-term goals or emergencies. You can add to this account at any time, but certain types of withdrawals may be limited to six per month. A nine-digit number that identifies your financial institution.

Since the 1970s, the ACH network has electronically moved money between bank accounts across the United States. Unsecured loan—An unsecured loan, also called a signature loan, is a loan made on your personal pledge to repay any money borrowed rather than being guaranteed by assets or collateral. Revolving credit—Revolving credit is common with credit cards and certain types of lines of credit for which you can borrow money, and as soon as that money is repaid, you can borrow it again. Cash flow—The amount of money that flows through a company to pay for operating expenses. It’s especially important for a fledgling company to manage cash flow, ensuring that more money is available for operations until it can build the business and generate more capital. Capital—The total market value of a company, including cash, assets, and investments.

When banks have enough money to cover potential losses. Banks are expected to maintain a sufficient level of capital to remain solvent and avoid failure. The FDIC and other federal regulators work with banks to maintain standards for solvency. Here are some commonly used banking terms you should know to be better informed about your financial life. After enrolling in a program, you may request a withdrawal with refund (minus a $100 nonrefundable enrollment fee) up until 24 hours after the start of your program.

Savings Account – typically an interest-bearing account used to hold money for short- or long-term goals or emergencies. Money can be added at any time, but certain types of withdrawals may be limited to six per month. Outstanding Check – a check written by a depositor that hasn’t yet been presented for payment or paid by the depositor’s bank. When the payment is presented and paid from the account, the status is considered cleared.

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