Banking Terms

ACH Origination: The ability to send and collect money electronically using the automated clearing house network.
 

Adjustable Rate Loan: An adjustable rate loan, also known as Variable Rate, is a loan in which the interest rate could change at any time during the length of the loan.
 

Annual Percentage Rate (APR): APR is the annual cost of a loan, including applicable interest and fees. APR is conveyed as a percentage.
 

Annual Percentage Yield (APY): APY represents the interest earned on deposits yearly. APY is conveyed as a percentage.
 

Appraisal: An appraisal is the estimate of an asset’s value.
 

ATM (Automated Teller Machine): An ATM is an electronic banking machine that is used to make deposits, withdrawals and transfer money. An ATM card or debit card and PIN number is necessary in order to use an ATM.
 

ATM Card: An ATM card gives you access to your accounts through an ATM. You will also need a Personal Identification Number (PIN) to use an ATM card.
 

Attachment: An attachment is a legal claim or lien against an asset.

Back-end Ratio: Back-end ratio is a mortgage loan calculation in which housing expenses plus long-term debt is conveyed as a percentage of your monthly gross income. A back-end ratio of no higher than 36% is preferred by most banks.

Balance: A balance represents the amount of money you have in a bank account, the amount of money remaining on a loan.

Bank Check: See “Cashier’s Check”.

Bankruptcy: Bankruptcy is a legal declaration of insolvency. Bankruptcy will be included in your credit history for as much as 10 years and will not resolve credit record issues.

Cashier’s Check (also called a Bank Check or Teller’s Check): A cashier’s check is a check written by your bank and is guaranteed not to bounce. In order to obtain a cashier’s check, you must provide money from your account in the exact amount of the check and tell your bank who the check should be made out to. A service fee is typically charged for this service.

Cash Management: A specialized department that offers services specifically designed to help optimize the cash flow of our commercial, municipal and not for profit customers.

Checking Account: A deposit account that allows you to write checks or use online tools to make payments.

ChexSystems or TeleCheck: These are systems that a bank may use to verify your information, including your checking account history, history of bounced checks, or other negative details reported about your checking history.

Closing Costs: Closing costs are costs related to changing property ownership, such as buying a house.

Collateral: Collateral represents pledge of specific property to a lender to secure prepayment of a loan.

Consumer Installment Loan: Consumer Installment Loans are loans that are paid back in equal monthly installments for a specific period of time.

Co-signer: A co-signer is someone who agrees to repay a loan if you fail to pay. Co-signers are often included on a loan when you have poor credit history or if you haven’t established a credit history.

Credit Report: A report that a bank and creditors use to attain details regarding your credit history.

Deposit: Money you add to an account.
 

Debit Card: A plastic card with a credit card company logo (ie MasterCard®), that allows you access to your accounts via an ATM and also allows you to make purchases outside of the bank where credit cards are accepted.
 

Deposit Interest: Money that a bank pays into your account for keeping your money at that bank. Deposit interest is based on the APY specific to an account.
 

Direct Deposit: A method of depositing a paycheck or benefit check into an account electronically, without visiting a bank and making a deposit.
 

Down Payment: The portion of a purchase price that a buyer pays in cash.

Electronic Bill Pay: A service that uses money from your checking account to automatically pay your bills.
 

Equity: The value of an asset, subtracting the debt you owe on the asset. Also see “Home Equity”.
 

Escrow Account: An account that is created to hold tax and/or insurance payments until the payments are due (usually for a home).

Fees: Fees are money that a bank may take out of an account in exchange for services they provide (such as a monthly maintenance fee) or as a penalty (for example, if you bounce a check).

Finance Charge: A fee associated with a line of credit. This includes interest, service charges and loan fees, which are typically charged monthly.

Fixed-Rate Loan: A fixed-rate loan is a loan that has an interest rate that remains the same throughout the life of the loan.

Foreclosure: A legal proceeding, initiated by a creditor, in which a bank takes possession of collateral that was used to secure a loan that has defaulted.

Garnishment: A process by which a lender legally obtains direct access to a portion of an individual’s salary in order to pay off a debt.
 

Grace Period: The amount of time you have to pay a balance before you are charged interest.

Home Equity: The money that remains after accounting for the value of a property minus the debt.
 

Home Equity Loan: A loan that utilizes the equity in a home as collateral (also known as a Second Mortgage).
 

Home Equity Line of Credit: An open-end loan which allows you to make withdrawals up to a certain limit.

Identity Theft: Identity theft is a federal crime in which someone illegally obtains and uses another person’s personal information in a fraudulent manner.
 

Installment Loan: See “Consumer Installment Loan”.
 

Interest: See “Loan Interest”

Judgment: A court order which places a lien on a debtor’s property as security for a debt owed.

Line of Credit: An open-end loan which allows you to make withdrawals up to a certain limit.
 

Lien: A creditor’s claim against property to obtain repayment of a debt.
 

Loan: Money you borrow from a bank or another entity with a written promise to pay it back in the future.
 

Loan Interest: The amount of money a bank charges for letting you borrow money. Interest rates are either fixed (the interest rate remains the same throughout the life of the loan) or variable (the interest rate could change during the life of the loan, as written in the loan contract).
 

Lock-in Rate: A lock-in rate allows the borrower to guarantee the interest rate will not change before the loan closes. This is typically offered on home loans.

Minimum Balance: A minimum amount of money that a bank may require you to keep on deposit in an account in order to earn interest and/or reduce or avoid fees.
 

Money Order: A money order is like a check and can be used to make payments or purchases. A money order can be obtained at a bank for any amount you choose. There is typically a small processing fee.
 

Mortgage: A mortgage is a loan used to purchase a home or a commercial property.

Net Worth: The difference between your assets and your debt.

Overdraft: An overdraft occurs when you do not have enough money in an account to cover the payments you’ve made. Also referred to as a bounced check, this can lead to a fee being charged to your account.
 

Overdraft Protection: A service that protects you from overdrawing your account. The bank can use money from one of your other accounts to cover the transaction. In some cases, the bank might lend you the money to cover overdraft, and you will be charged interest until you repay the amount.

Phishing: The act of sending an email to an individual, falsely claiming to be a legitimate enterprise in an attempt to persuade the individual to surrender information that will be used for identity theft.
 

PIN: A PIN (Personal Identification Number) is a password which needs to be used with an ATM or debit card in order to access an account.
 

Principal Payment: A principal payment is an amount applied to an outstanding balance of a loan, not to the interest owed.
 

Private Mortgage Insurance (PMI): PMI is mortgage insurance that is typically required for buyers who do not have at least a 20% down payment. It protects the lender if the buyer defaults on the mortgage.

Rate Index: The base interest rate that is used to calculate the interest rate charged on a variable-rate loan. The rate on a variable-rate loan is typically a set percentage above the base rate/ index.
 

Repossession: The confiscation of collateral that was used to secure a loan that has defaulted.
 

Right to Rescind: A term describing a Federal law that obliges lenders to allow borrowers three days to reconsider and allows the option to cancel without penalty when a borrower uses their primary home as collateral for a home-equity loan.

Savings Account: A type of deposit account that earns interest on the account balance.
 

Secured Loan: A loan where the borrower offers collateral for the loan; the borrower gives up their right to the collateral if the loan is not repaid as the agreement stipulates.
 

Signature Card: A signature card is a contract that identifies the owner or owners of an account and will be used to verify signatures on checks and withdrawals.

Telephone Banking: Telephone banking allows you to access some banking services via phone, such as checking an account balance, transferring money and obtaining account history.
 

Teller’s Check: See “Cashier’s Check”.

Unsecured Loan: A loan in which the lender does not require collateral.

Variable-Rate Loan: A loan that has an interest rate that could change at any time during the life of the loan, as stipulated in the loan agreement. Also known as “Adjustable Rate”.

Withdrawal: The process of removing money from a bank account via check, ATMs or withdrawal slips.
 

Wire Transfer: An electronic way of transferring money from one account to another, worldwide.