A unique code present on a check assigned by the American Bankers Association (ABA) that identifies a particular bank or finance institution issuing the check. Also known as the bank routing number
an arrangement made with a bank whereby one may deposit and withdraw money and in some cases be paid interest.
In banking, ACH stands for Automated Clearing House, which is a network that coordinates electronic payments and automated money transfers. ACH is a way to move money between banks without using paper checks, wire transfers, credit card networks, or cash.
An adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan. Normally, the initial interest rate is fixed for a period of time, after which it resets periodically, often every year or even monthly. The interest rate resets based on a benchmark or index plus an additional spread, called an ARM margin.
A person who gives advice in a particular field
Amortization is an accounting term that refers to the process of allocating the cost of an intangible asset over a period of time. It also refers to the repayment of loan principal over time.
An annual percentage rate (APR) is the annual rate charged for borrowing or earned through an investment. APR is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan.
An automated teller machine (ATM) is an electronic banking outlet that allows customers to complete basic transactions without the aid of a branch representative or teller. Anyone with a credit card or debit card can access most ATMs
Appreciation, in general terms, is an increase in the value of an asset over time. The increase can occur for a number of reasons, including increased demand or weakening supply, or as a result of changes in inflation or interest rates
An asset is a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide a future benefit. Assets are reported on a company's balance sheet and are bought or created to increase a firm's value or benefit the firm's operations.
An asset can be thought of as something that, in the future, can generate cash flow, reduce expenses, or improve sales, regardless of whether it's manufacturing equipment or a patent.
given or endowed with authority: an authorized agent.
the amount of money held in a bank account at a given moment.
A balloon loan is a type of loan that does not fully amortize over its term. Since it is not fully amortized, a balloon payment is required at the end of the term to repay the remaining principal balance of the loan
A bank is a financial institution licensed to receive deposits and make loans. Banks may also provide financial services, such as wealth management, currency exchange, and safe deposit boxes. There are two types of banks: commercial/retail banks and investment banks.
A bank draft is a payment on behalf of a payer that is guaranteed by the issuing bank. Typically, banks will review the bank draft requester's account to see if sufficient funds are available for the check to clear. Once it has been confirmed that sufficient funds are available, the bank effectively sets aside the funds from the person's account to be given out when the bank draft is used. A draft ensures the payee a secure form of payment. And the payer's bank account balance will be decreased by the money withdrawn from the account.
Bankruptcy is a legal term for when a person or business cannot repay their outstanding debts. The bankruptcy process begins with a petition filed by the debtor, which is most common, or on behalf of creditors, which is less common. All of the debtor's assets are measured and evaluated, and the assets may be used to repay a portion of outstanding debt.
A bank statement is a record, typically sent to the account holder every month, summarizing all the transactions in an account throughout the time from the previous statement to the current one. The opening balance from the previous month added to the total of all transactions during the period results in the closing balance for the current statement. Consumers should carefully review their bank statements and keep them for their own financial records.
An automatic bill payment is a money transfer scheduled on a predetermined date to pay a recurring bill. Automatic bill payments are routine payments made from a banking, brokerage, or mutual fund account to vendors
A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. A bond has an end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments that will be made by the borrower. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer.
to borrow (money) with the intention of returning the same plus interest
a person or organization that takes out a loan from a bank under an agreement to pay it back later, typically with interest.
Branch banking is engaging in banking activities such as accepting deposits or making loans at facilities away from a bank's home office. Branch banking has gone through significant changes since the 1980s in response to a more competitive nationwide financial services market
A certificate of deposit (CD) is a savings certificate with a fixed maturity date and specified fixed interest rate that can be issued in any denomination aside from minimum investment requirements. A CD restricts access to the funds until the maturity date of the investment
Card holder or cardholder may refer to: A person who owns a card, such as a cardholder of a credit card or debit card.
Cash is legal tender -- currency or coins -- that can be used to exchange goods, debt or services.
Cash reserves refer to the money a company or individual keeps on hand to meet short-term and emergency funding needs. Short-term investments that enable customers to quickly gain access to their money, often in exchange for a lower rate of return, can also be called cash reserves.
A cashier's check is a check drawn from a bank's own funds, instead of yours, and signed by a cashier or teller. It is unlike a regular check because the bank guarantees payment, not the check writer.
wealth in the form of money or other assets owned by a person or organization or available or contributed for a particular purpose such as starting a company or investing.
A central bank is a financial institution given privileged control over the production and distribution of money and credit for a nation or a group of nations. In modern economies, the central bank is usually responsible for the formulation of monetary policy and the regulation of member banks.
A certified check is a personal check written by a bank account holder, drawn on the account and guaranteed by the bank. The bank verifies that the signature is genuine and that the check writer has enough money for the transaction, and sets aside the full amount of the check for when it’s cashed or deposited.
A charge-off is a debt, for example on a credit card, that is deemed unlikely to be collected by the creditor because the borrower has become substantially delinquent after a period of time. However, a charge-off does not mean a write-off of the debt entirely.
The Check Clearing for the 21st Century Act (Check 21) is a federal law that is designed to enable banks to handle more checks electronically, which should make check processing faster and more efficient. ... A substitute check is a legal equivalent of the original check
Checking Account Number
An account number is the primary identifier for ownership of an account, whether a vendor account, a checking or brokerage account, or a loan account. An account number is used whether or not the identifier uses letters or numbers.
something pledged as security for repayment of a loan, to be forfeited in the event of a default
A commercial bank is a type of financial institution that accepts deposits, offers checking account services, makes various loans, and offers basic financial products like certificates of deposit (CDs) and savings accounts to individuals and small businesses.
Compound interest (or compounding interest) is interest calculated on the initial principal, which also includes all of the accumulated interest of previous periods of a deposit or loan. Thought to have originated in 17th century Italy, compound interest can be thought of as “interest on interest,” and will make a sum grow at a faster rate than simple interest, which is calculated only on the principal amount.
To combine several accounts, debts into one smaller more manageable payement
Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (CFPB) is a regulatory agency charged with overseeing financial products and services that are offered to consumers. The CFPB is divided into several units: research, community affairs, consumer complaints, the Office of Fair Lending and the Office of Financial Opportunity
To cosign is the act of signing cooperatively with a borrower for a loan. A cosigner serves as an additional repayment source for the primary borrower. A cosigner can help a borrow to obtain loan terms that they may have otherwise been unable to be approved for
made in exact imitation of something valuable or important with the intention to deceive or defraud.
the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.
The term credit limit refers to the maximum amount of credit a financial institution extends to a client. A lending institution extends a credit limit on a credit card or a line of credit. Lenders usually set credit limits based on information in the application of the person seeking credit.
A credit limit is one of the factors that affect consumers' credit scores and can impact their ability to get credit in the future
Line of Credit
A line of credit is a preset amount of money that a bank or credit union has agreed to lend you. You can draw from the line of credit when you need it, up to the maximum amount. You'll pay interest on the amount you borrow.
a nonprofit-making money cooperative whose members can borrow from pooled deposits at low interest rates.
Currency is a generally accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy. Used as a medium of exchange for goods and services, currency is the basis for trade.
an establishment authorized to buy and sell specific goods, especially motor vehicles.
money taken out of a bank account
a card issued by a bank allowing the holder to transfer money electronically to another bank account when making a purchase.
Debt to Income Ratio
The debt-to-income ratio is the percentage of your gross monthly income that goes to paying your monthly debt payments. The DTI ratio is one of the metrics that lenders, including mortgage lenders, use to measure an individual's ability to manage monthly payments and repay debts.
Debt snowball is a method of debt repayment in which the debtor lists each of his/her debts from smallest to largest (not including the mortgage), then devotes extra money each month to paying off the smallest debt first while making only minimum monthly payments on all of the other debts
a legal document that is signed and delivered, especially one regarding the ownership of property or legal rights.
failure to fulfill an obligation, especially to repay a loan or appear in a court of law.
Deferment is an agreement between a lender and a borrower to temporarily suspend debt payments.
A demand deposit consists of funds held in an account from which deposited funds can be withdrawn at any time from the depository institution.
Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account for declines in value. Businesses depreciate long-term assets for both tax and accounting purposes.
an initial payment made when something is bought on credit.
a payment system whereby creditors are authorized to debit a customer's bank account directly at regular intervals.
Direct deposit is the deposit of electronic funds directly into a bank account rather than through a physical, paper check. Common uses for direct deposit include income tax, refunds and pay checks.
the standard unit of money used in the US, Canada, Australia, New Zealand, and other countries:
An electronic funds transfer (EFT) is a transaction that takes place over a computerized network, either among accounts at the same bank or to different accounts at separate financial institutions.
Earnest money is a deposit made to a seller that represents a buyer's good faith to buy a home. ... Once deposited, the funds are typically held in an escrow account until closing, at which time the deposit is applied to the buyer's down payment and closing costs.
convert (information or data) into a cipher or code, especially to prevent unauthorized access
The three types of check endorsements are blank, restrictive and special. Each type of endorsement has its own rules for depositing or cashing the check. A blank endorsement, the most common type, is endorsed by the payee and presented to the bank for cash or deposit.
Put simply, equity is ownership.
In the trading world, equity refers to stock. In the accounting and corporate lending world, equity (or more commonly, shareholders’ equity) refers to the amount of capital contributed by the owners or the difference between a company’s total assets and its total liabilities.
In the real estate world, equity refers to the difference between an asset’s market value and the debt owed on the asset.
Escrow is a financial arrangement whereby a third party holds funds in safekeeping pending the completion of a contract or other obligation.
the value of one currency for the purpose of conversion to another.
The Free Application for Federal Student Aid (FAFSA) is a form completed by current and prospective college students (undergraduate and graduate) in the United States to determine their eligibility for student financial aid.
The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency insuring deposits in U.S. banks and thrifts in the event of bank failures. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices
Federal Fair Debt Collections Practices Act
The Fair Debt Collection Practices Act, Pub. L. 95-109; 91 Stat. 874, codified as 15 U.S.C. § 1692 –1692p, approved on September 20, 1977 is a consumer protection amendment, establishing legal protection from abusive debt collection practices, to the Consumer Credit Protection Act, as Title VIII of that Act.
Federal Open Market Committee
The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve Board that determines the direction of monetary policy. ... A vote to change policy would result in either buying or selling U.S. government securities on the open market to promote the growth of the national economy.
The Federal Reserve System, often referred to as the Federal Reserve or simply "the Fed," is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system
A fee is a fixed price charged for a specific service. Fees are applied in a variety of ways such as costs, charges, commissions, and penalties. Fees are most commonly found in heavily transactional services and are paid in lieu of a wage or salary.
A finance charge is usually added to the amount you borrow, unless you pay the full amount back within the grace period . In some instances, such as credit card cash advances, you need to pay a finance charge even if you pay the amount in full by the due date.
Finance charges vary based on the type of loan or credit you have and the company. A common way of calculating a finance charge on a credit card is to multiply the average daily balance by the annual percentage rate (APR) and the days in your billing cycle. The product is then divided by 365 .
Mortgages also carry finance charges. When you take out a mortgage, you typically have to pay interest as well as discount points, mortgage insurance and other fees. Anything above the principal on the loan is a finance charge.
n financial terms, the float is money within the banking system that is briefly counted twice due to time gaps in the registering of a deposit or withdrawal, usually due to the delay in processing paper checks. A bank credits a customer's account as soon as a check is deposited.
In the context of a mortgage process, forbearance is a special agreement between the lender and the borrower to delay a foreclosure. The literal meaning of forbearance is “holding back.” When mortgage borrowers are unable to meet their repayment terms, lenders may opt to foreclose.
Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.
Financial fraud can be broadly defined as an intentional act of deception involving financial transactions for purpose of personal gain. Fraud is a crime, and is also a civil law violation.
A grace period is a set amount of time after the due date during which a payment can be received by the creditor without penalty. ... If your lender offers a grace period, you typically will not be charged a late fee or reported delinquent if your payment is posted during this time.
sum of money given by a government or other organization for a particular purpose.
A home equity line of credit (often called HELOC, pronounced Hee-lock) is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower's equity in his/her house (akin to a second mortgage).
Inflation is the increase in the prices of goods and services over time. ... Inflation reduces the purchasing power of each unit of currency. U.S. inflation has reduced the value of the dollar. Compare the dollar's value today with that in the past. As prices rise, your money buys less.
A minimum deposit is the minimum amount of money required to open an account with a broker, financial advisor or bank. It is sometimes called an initial deposit or, in the case of bank accounts, minimum balance.
An installment loan is a loan that is repaid over time with a set number of scheduled payments; normally at least two payments are made towards the loan. The term of loan may be as little as a few months and as long as 30 years. A mortgage, for example, is a type of installment loan.
A loan between lender and borrower which accrues interest over the pre-determined loan period. Examples of interest bearing notes include mortgage loans and student loans. Borrowers promise to repay the principal balance as well as any accrued interest.
The interest rate is the cost of borrowing the principal loan amount. The rate can be variable or fixed, but it’s always expressed as a percentage.
The APR is a broader measure of the cost of a mortgage because it includes the interest rate plus other costs such as broker fees, discount points and some closing costs, expressed as a percentage.
Joint Account Holder
A joint account is a bank account shared by two or more individuals. Any individual who is a member of the joint account can withdraw from the account and deposit to it. Usually, joint accounts are shared between close relatives or business partners
a contract by which one party conveys land, property, services, etc. to another for a specified time, usually in return for a periodic payment.
Legal tender is any official medium of payment recognized by law that can be used to extinguish a public or private debt, or meet a financial obligation. The national currency is legal tender in practically every country. A creditor is obligated to accept legal tender toward repayment of a debt.
A lender is an individual, a public or private group, or a financial institution that makes funds available to another with the expectation that the funds will be repaid. Repayment will include the payment of any interest or fees. Repayment may occur in increments (as in monthly mortgage payment) or as a lump sum.
Prime Lending Rate
A prime rate or prime lending rate is an interest rate used by banks, usually the interest rate at which banks lend to favoured customers—i.e., those with good credit. Some variable interest rates may be expressed as a percentage above or below prime rate.
A claim against the assets, or legal obligations of a person or organization, arising out of past or current transactions or actions.
a right to keep possession of property belonging to another person until a debt owed by that person is discharged.
1. A measure of the extent to which a person or organization has cash to meet immediate and short-term obligations, or assets that can be quickly converted to do this.
2. Accounting: The ability of current assets to meet current liabilities.
3. Investing: The ability to quickly convert an investment portfolio to cash with little or no loss in value.
Loan Forgiveness. Loan forgiveness means you are no longer expected to repay your loan. Certain circumstances might lead to forgiveness, cancellation, or discharge of your outstanding federal student loan balance.
Money Market Account
A money market account is an interest-bearing account at a bank or credit union—not to be confused with a money market mutual fund. ... Most money market accounts pay a higher interest rate than regular passbook savings accounts and often include checkwriting and debit card privileges
A money order is a paper document, similar to a check, used for making payments. Money orders are prepaid, so they are only issued after a buyer pays for the money order with cash or another form of guaranteed funds.
A mortgage broker is an intermediary who brings mortgage borrowers and mortgage lenders together, but does not use their own funds to originate mortgages. ... The broker also gathers paperwork from a borrower and passes that paperwork along to a mortgage lender for underwriting and approval.
The National Credit Union Administration (NCUA) is the independent federal agency created by the United States Congress to regulate, charter, and supervise federal credit unions.
The term non-sufficient funds (NSF), or insufficient funds, refers to the status of a checking account that does not have enough money to cover transactions. NSF also describes the fee charged when a check is presented but cannot be covered by the balance in the account.
In accounting, net worth is defined as assets minus liabilities. Essentially, it is a measure of what an entity is worth. For an individual, it represents the properties owned, less any debt the person has. For a company, net worth is the value of the company.
An obligation is a legal requirement to fulfill a responsibility. In the finance world, this often involves making specific payments by specific dates and/or ensuring that a company meets certain performance requirements
Overdraft protection is a service that automatically transfers funds from one bank account to another in order to avoid overdraft fees when insufficient funds are available. It can apply to savings accounts, checking accounts, lines of credit or credit cards. Overdraft protection carries its own fees, however.
if you are overdrawn, or if your bank account is overdrawn, you owe your bank money that you have spent when there was no money in your account.
A payee is the party in an exchange who receives payment. A payee is paid by cash, check or another transfer medium by a payer. The payer receives goods or services in return.
PITI is an acronym that stands for "principal, interest, taxes, and insurance." ... All borrowers with a mortgage have to pony up for property taxes and insurance, although not everybody does that through their mortgage payment.
PMI is insurance provided by private mortgage insurers to protect lenders against loss if a borrower cannot pay repayments. PMI insures the lender in case the buyer defaults on the loan. PMI is insurance written by a private company protecting the mortgage lender against loss occasioned by a mortgage default.
The POS is the place in a store where a product is passed from the seller to the customer. POS is an abbreviation for point of sale. [business] ...a POS system that doubles as an inventory and sales control system.
Phishing is a cybercrime in which a target or targets are contacted by email, telephone or text message by someone posing as a legitimate institution to lure individuals into providing sensitive data such as personally identifiable information, banking and credit card details, and passwords.
The information is then used to access important accounts and can result in identity theft and financial loss.
Point Buy Down
Share. Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called “buying down the rate,” which can lower your monthly mortgage payments. One point costs 1 percent of your mortgage amount (or $1,000 for every $100,000).
Primary Account Holder
A primary account holder is the individual who is legally responsible for all charges made to a credit or debit card account. ... With most financial accounts the primary account holder has the option to allow for issuance of additional cards to authorized users.
(of money) denoting an original sum invested or lent.
a signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand.
be entitled to a particular benefit or privilege by fulfilling a necessary condition.
Reconciliation is an accounting process that uses two sets of records to ensure figures are correct and in agreement. It confirms whether the money leaving an account matches the amount that's been spent, and ensures the two are balanced at the end of the recording period.
Repossession is a process where an auto lender can take back possession of your vehicle, sometimes without warning you in advance or having permission from the court. ... Repossession typically occurs after you fall behind on your auto loan payments.
he Rule of 72 is a quick, useful formula that is popularly used to estimate the number of years required to double the invested money at a given annual rate of return. ... Alternatively, it can compute the annual rate of compounded return from an investment given how many years it will take to double the investment.
Rule of 72
he Rule of 72 is a quick, useful formula that is popularly used to estimate the number of years required to double the invested money at a given annual rate of return. ... Alternatively, it can compute the annual rate of compounded return from an investment given how many years it will take to double the investment.
Safe Deposit Box
A safe deposit box is a metal box, usually housed in a bank vault, that customers can rent in order to keep valuables, legal documents and other prized possessions in a secure location.
A savings account is an interest-bearing deposit account held at a bank or other financial institution that provides a modest interest rate. ... They also may charge fees unless you maintain a certain average monthly balance in the account. In most cases, banks do not provide checks with savings accounts.
A secured l is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan.
Officer or representative vested (explicitly, implicitly, or through conduct) with the powers to commit the authorizing organization to a binding agreement.
A signature card is a document that a bank keeps on file with the signatures of all the authorized people on that account. The bank employees can use this card to verify signatures on checks to make sure the proper people sign them
Interest computed only on the principal and (unlike compound interest) not on principal plus interest earned or incurred in the previous period(s). Simple interest is used commonly in variable rate consumer lending and in mortgage loans where a borrower pays interest only on funds used. Formula: Principal amount x Annual interest rate x Number of years.
A bank statement or account statement is a summary of financial transactions which have occurred over a given period on a bank account held by a person or business with a financial institution.
Subprime is a classification of borrowers with a tarnished or limited credit history. Lenders will use a credit scoring system to determine which loans a borrower may qualify for. Subprime loans carry more credit risk, and as such, will carry higher interest rates as well.
Subsidized Loans are loans for undergraduate students with financial need, as determined by your cost of attendance minus expected family contribution and other financial aid (such as grants or scholarships). Subsidized Loans do not accrue interest while you are in school at least half-time or during deferment periods.
Terms and Conditions
Special and general arrangement, rule, requirements, standards etc. Forming integral parts of a contract or agreement.
a form of lending in which the debt is divided into two separate parts, as in a first and second mortgage held by an individual on a single property
In property law, a title is a bundle of rights in a piece of property in which a party may own either a legal interest or equitable interest. The rights in the bundle may be separated and held by different parties. It may also refer to a formal document, such as a deed, that serves as evidence of ownership.
Trade In Value
The net trade-in value is the amount of money offered to you by a car dealer for your old car, to be applied as a credit toward your purchase of a new vehicle.
A change in ownership of an asset, or a movement of funds and/or assets from one account to another. A transfer may involve an exchange of funds when it involves a change in ownership, such as when an investor sells a real estate holding.
Agreement, contract, exchange, understanding, or transfer of cash or property that occurs between two or more parties and establishes a legal obligation.
Truth in Lending Disclosure
The Truth in Lending Act (TILA) of 1968 is a United States federal law designed to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.
having, relating to, or being a mortgage loan for which more is owed than the property securing the loan is worth.
Underwriting is the process that a lender or other financial service uses to assess the creditworthiness or risk of a potential customer. Underwriting also refers to an investment banker's process of packaging and selling a security on behalf of a client.
An unsecured loan is a loan that is issued and supported only by the borrower's creditworthiness, rather than by any type of collateral. Unsecured loans—sometimes referred to as signature loans or personal loans—are obtained without the use of property or other assets as collateral.
When you have an upside down car loan (which can also sometimes be referred to as being “underwater”), it simply means that you currently owe your finance lender more than your car is currently worth.
Also called login name, logon name, sign-in name, sign-on name. a unique sequence of characters used to identify a user and allow access to a computer system, computer network, or online account
A variable rate, or variable interest rate, is the amount charged to a borrower for a variable-rate loan, such as a mortgage. A variable rate is usually expressed as an annual percentage and fluctuates in tandem with a rate index.
A bank vault is a secure space where money, valuables, records, and documents are stored. It is intended to protect their contents from theft, unauthorized use, fire, natural disasters, and other threats, much like a safe. ... These older vaults were typically made with steel-reinforced concrete.
The Card Verification Number/Code anti-fraud system was created so that if someone gets possession of your credit card numbers they also need to have possession of your physical card in order to use the card. American Express calls it the CID (Card Identification Number). For MasterCard, it is the CVC2 (Card Validation Code). Visa calls this number the CVV2 (Card Verification Value).
to prove the truth of, as by evidence or testimony; confirm; substantiate
is the sale of goods in bulk at a discount to merchants for resale to retailers; industrial, commercial, institutional or professional users; or other wholesalers – sometimes involving a middleman (agent or broker).
an act of taking money out of an account.
Wire Transfer (International and Domestic)
Wire transfer, bank transfer or credit transfer is a method of electronic funds transfer from one person or entity to another. A wire transfer can be made from one bank account to another bank account or through a transfer of cash at a cash office.