Glossary of Common Banking Terms
Actual Balance: Your account's actual balance (sometimes called the current or ledger balance) only includes transactions that have settled up to that point in time, that is, transactions (deposits and payments) that have posted to your account. The actual balance does not include outstanding transactions (such as checks that have not yet cleared and electronic transactions that have been authorized but are still pending). Your periodic statement displays the actual balance for your account. Actual balance and ledger balance are interchangeable terms.
Annual Percentage Rate (APR): the percentage of interest you will pay on the unpaid balance of a credit card or loan over the course of one year
Annual Percentage Yield (APY): the percentage of interest earned on an interest-bearing deposit account.
Automated Teller Machine (ATM): a machine at which you can withdraw cash, make deposits, get balances, and transfer money between accounts
Balance: (1) the amount of money remaining in a bank account; (2) the unpaid portion of a bill
Cashier's check: sometimes referred to as an official or certified check, a cashier's check is a check issued by the bank and signed by a bank official. It is often issued on behalf of a bank customer who pays the bank the face value of the check upon its issuance to a third party.
Checking account: a bank account from which money may be withdrawn by writing a check or using a debit/ATM card.
Collateral: property pledged to a lender by a borrower as a backup source of loan repayment
Credit card: a card that may be used instead of cash for some purchases, of which at least a portion must be paid each month with interest accumulating on any unpaid balance
Credit report: a report that provides information on where you work and live and how you pay your bills
Credit score: a rating compiled from the data in one's credit report which is used by banks and other businesses to determine the level of credit risk a person represents.
Debit card: a card that may be used instead of cash for some purchases. The funds are deducted from the available balance in your checking account.
Debt: the amount of money you owe to other people or businesses
Deposit: (1) the action of putting money into a bank account; (2) a credit transaction posted to bank account
Direct Deposit: an electronic transfer of a payment directly from the account of the payer (such as an employer or government agency) to your checking or savings account.
Finance charge: money you pay in the form of interest on the unpaid balance of a bill/statement
Gross pay: the amount of money you are paid before any deductions (ex. taxes, insurance, retirement, etc.) are taken
Income: the total amount of money you earn from employment and other sources
Interest: the percentage you earn from your deposits in a bank account or the percentage you pay on a loan
Ledger Balance: Your account's ledger balance (sometimes called the current or actual balance) only includes transactions that have settled up to that point in time, that is, transactions (deposits and payments) that have posted to your account. The ledger balance does not include outstanding transactions (such as checks that have not yet cleared and electronic transactions that have been authorized but are still pending). Your periodic statement displays the ledger balance for your account. Ledger balance and actual balance are interchangeable terms.
Loan: money that you borrow and then, typically, pay back in installments over a set period of time
Minimum balance: the least amount of money that you can have in a bank account in order to avoid a service fee
Money order: a check that may be purchased with cash at some financial institutions or the U.S. Postal Service office
Paycheck: a check by which you are paid a wage for regular employment
Pay stub: a detachable portion of a paycheck, which you keep for your records after depositing the paycheck in the bank
Payment guarantee: an assurance that you have enough funds available to cover the amount of a check
Personal check: a check from your personal checking account that has your name and address on it
Principal: an amount of borrowed money, not including interest
Remitter: the person who pays or sends money for purchases by cash, check, or electronic transfer
Salary deductions: money taken out of your wages for federal, state, and local taxes, as well as for Social Security and other benefits (such as, health insurance and retirement funds)
Savings account: a deposit account with limited withdrawals that pays interest on the account's balance.
Take-home pay: the amount of money remaining in your paycheck after deductions (taxes, Social Security) have been taken (also called net pay)
Term: (1) the period of time within which a loan must be repaid; or (2) the period of time for which a certificate of deposit must be held in order to reach maturity.
Transfer: to withdraw money from one account and deposit it in another
Withdraw: to take money out of a bank account