Your Guide to Essential Banking Terms
This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). These offers do not represent all available deposit, investment, loan or credit products. 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. 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.
- This includes a limit of $250,000 in cash in your account.
- Here are a dozen crucial terms that you need to comprehend on your journey to financial fluency.
- There are many types of CDs, but most require that you lock up your money for a minimum term, such as six months or one year.
- A bank is a financial institution that is licensed to accept checking and savings deposits and make loans.
- Most people use checking accounts to receive their wages and pay their bills.
IPS also specifies the portfolio manager’s strategy to achieve the client’s desired results. This deposit can be refundable or non-refundable, depending upon the terms and conditions of the rental contract. The security deposit can be used by the landlord to recover the property loss or damage caused by the renter. It is an investment that you cannot pull out or cash out before the end of the term. For instance, a GIC investment of a 5-year term cannot be pulled out or cashed out before the end of the 5 years.
What Is an Available Bank Balance and a Current Bank Balance?
If you need financial advice offered in everyday English, without buzzwords, you can always come to iQ Credit Union for simple answers to your financial questions. Risk tolerance—This is an expression of an investor’s comfort with the risk of losing some or all of his or her investments in exchange for higher returns. Depreciation—Depreciation is the loss in value of an investment or property over time. Automobiles, for example, depreciate quickly, which can affect how much you can borrow to buy a car. Common stock—An investment for which you purchase shares in a publicly owned company. Capital loss—A decrease in the value of an investment or property from the purchase price.
The accounts are commonly used by couples, parents and their teenage children, and adults assisting aging parents. A way of organizing a sum of money into separate certificates of deposit of varying lengths so that they mature at different times. The method allows greater accessibility to your money than putting all of it in one certificate for a long period.
A CD provides higher interest rates than standard checking and savings accounts. A bank is a financial institution that is licensed to accept checking and savings deposits and make loans. Banks also provide related services such as individual retirement accounts (IRAs), certificates of deposit https://1investing.in/ (CDs), currency exchange, and safe deposit boxes. A payment method where people can sign up to have paychecks automatically deposited into their account, without having to endorse and deposit a check. Many banks offer reduced fees to customers who have recurring direct deposits.
Most banks can be categorized as retail, commercial or corporate, or investment banks. The big global banks often operate separate arms for each of these categories. Banks offer various ways to stash your cash and various ways to borrow money. A quick way to send money electronically to another person, domestically or internationally, through a bank or another provider. When you're dealing with your finances, unfamiliar words and acronyms can make complicated processes even more confusing.
Automatic Bill Payment
The cash that is deposited by their customers is lent out to other customers at a higher rate of interest than the depositor is paid. A financial institution that accepts deposits in exchange for a share of ownership, and primarily lends money for mortgages. An account that usually pays interest at a financial institution that holds money you want to keep for long-term goals or emergencies. A bounced-check fee, charged to the person trying to deposit the check. It can be charged if there are insufficient funds in the check writer's account or the account is closed.
Retail banks offer their services to the general public and usually have branch offices as well as main offices for the convenience of their customers. A request you can make to your financial institution to deny a check or payment that has not cleared. A secured container in a vault at a bank or credit union that only its owner(s) can access. It comes with a yearly fee and can be used to store valuable items such as jewelry, keepsakes or important documents.
Member Services
Capital gain—An increase in the value of an investment or property from the purchase price. Basis point—A basis point is one-hundredth of 1 percent, e.g., 10 basis points would be 0.10%. Basis points are often used to express interest rates and can have essential banking terms you need to know a large impact when deciding on a home loan. Gross profit—Gross profit is the amount of money a company takes in before deducting expenses. Variable expenses—Expenses that are less predictable and vary from month to month are variable expenses.
The APY is an indicator of how much interest your deposit will earn over the course of one year, assuming you don’t withdraw any funds from it. A bank calculates APY using a formula that includes the interest rate offered and the frequency of compounding (another concept you should know; see “What Is Compound Interest?” below). You have to keep your money somewhere, and generally, the safest place is in a savings bank or credit union, as they are insured by the Federal Deposit Insurance Corp. (FDIC) against losses. These financial institutions offer a variety of accounts, and a checking account is one of them. A checking account is designed to provide quick access to your funds for daily transactional needs, such as paying bills or buying products.
Accumulating credit card debt that you cannot pay off can happen easier than you might think, and should be guarded against. A loan is an agreement between two people or entities where one party temporarily gives a sum of money to the other. The party getting the money pays interest for the privilege.
The FDIC is a federal government agency that helps ensure the stability of the U.S. financial system and protects bank customers. If you deposit your money into an FDIC-insured bank account, your money is protected up to $250,000 per depositor, for each account ownership category, in the event of a bank failure. If a bank offers them, brokerage services to individuals, retirement planning, insurance, and other wealth management products also qualify as personal banking products and services. Guaranteed Investment Certificate (GIC) is the safest investment plan which guarantees your money. You invest money into it for a specified period of time and earn interest over it.
Outstanding balance is the interest-bearing amount owed on a loan or debt up to a particular date. It’s important to understand common bank terms and definitions. Knowing the lingua and getting more comfortable with the terminology makes the interaction with the institution easy.
