Browse the glossary by topic or alphabetically.

MONEY MANAGEMENT

Accrued interest
Interest between the most recent interest payment and the present date but not yet paid to the lender
Account
Depository or credit relationship between a customer and a financial institution that includes checking, savings, credit or money market agreements
Account activity
Summary of activity on an account, including starting balance, payments and credits
Account history
Transaction history of an account over a specified period
Account number
Unique number given to a current account; on bank statements and printed as the last group of computer-type figures at the bottom of checks
Adjusted gross income (AGI)
Also known as net income, amount of income used to determine how much of one's income is taxable; calculated as gross income from taxable sources minus allowable deductions, such as unreimbursed business expenses, medical expenses, alimony and deductible retirement plan contributions
Annual percentage rate (APR)
Cost of credit expressed as an annual rate
Annual percentage yield (APY)
Percentage rate reflecting the total amount of interest paid on any account, based on the interest rate and compounding for a one-year period
Annual report
Annual publication that public corporations must provide to shareholders to describe their operations and financial conditions
Assets
Personal possessions of value, including cash, real estate and investments
ATM fees
Charges assessed by a bank as a convenience charge from a bank not associated with the person using the machine
Automated clearing house (ACH)
Networks used as a means to transfer money electronically between accounts at different institutions, usually in one day
Automatic payment
Preauthorized payment deducted automatically from an account to pay recurring bills; usually scheduled for the same calendar day of the month
Automatic transfer
Arrangement that moves money at certain specified times, often monthly, from one account into a different account
Available balance
Portion of a customer's account balance on which the bank has placed no restrictions, making it available for immediate withdrawals
Balance
Amount of money in one's current account
Balance due
Dollar amount representing the sum of the previous balance due plus cash advances and merchandise purchases for the billing period, less credit for payments and/or merchandise returned, plus any appropriate finance charge
Balance owing
Amount outstanding
Balance sheet
Financial statement showing assets and liabilities at a specific time
Bank debits
Sum of all checks and other instruments charged against the deposited funds of a bank's customers
Bank identification
Series of digits used to identify a particular bank
Bankruptcy
Official filing for protection against creditors due to the inability to pay all of one's debts as they come due
Basis point
In the bond market, the smallest measure used for quoting yields is a basis point (1 basis point is 0.01% of a bond's yield; basis points also are used for interest rates; an interest rate of 5% is 50 basis points greater than an interest rate of 4.5%)
Cancellation
Voiding of a document by defacement, perforation or other means, whereby restoration is made possible; as an investment reference, termination of an insurance contract prior to the end of the policy period
Collateral
Asset that can be sold for cash and has been pledged to a creditor to secure a future obligation (i.e. if one finances a car, it is the collateral for the loan)
Compounding
Also known as compound interest, ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings
Consumer credit
Debt incurred or the purpose of purchasing a good or service; includes purchases made on credit cards, lines of credit and some loans; also referred to as consumer debt
Credit limit / line
Amount of credit that a financial institution extends; maximum amount a credit card company will allow someone to borrow on a single card
Credit rating
Score used by potential creditors to quantify how likely a person will repay a loan; based on financial resources and credit history; total debt level compared to income level, timeliness in paying bills, number of credit cards and many other factors are taken into consideration
Credit report
Report of an individual or company's history of repaying past loans and other liabilities; provided to a bank/company when it is considering granting credit to customers
Credit score
Number that indicates individual's creditworthiness; determined by credit bureaus with a statistical program that gives points for such things as credit card debt, number of cards, total debt level and whether one rents or owns his/her home; creditors use the score to decide whether to approve a mortgage loan, issue a credit card or offer a small business loan; a good score can result in a lower interest rate; a poor score can result in a higher interest rate or loan denial
Current balance
Amount of funds in the account including pending activity; does not include any funds available from other accounts; holds are not included in this balance
Debit
Decreases in an account, such as when a check is written against that account
Debt ratio
Total debt divided by total assets; used by financial lenders as a rule of thumb to give a preliminary assessment of whether a potential borrower is already in too much debt
Default
Failure to make timely payment of interest or principal on a debt security
Debit card
Card that allows one to pay for goods in shops and withdraw money at ATMs; unlike a credit card, a debit card takes the money from the person's current account when it is spent
Demand deposit
Deposit that can be withdrawn at any time without advance notice; most common type is the checking account
Dependent
Person who is dependent for support upon another, to be distinguished from one who merely derives a benefit from the earnings of another
Deposit
Process of paying cash and checks into one's account
Deposit insurance
U.S. government backing of bank deposits up to a certain amount-currently, $100,000
Direct deposit
Electronic deposit of wages or benefits, such as pension or Social Security, into a personal bank account; deposits are handled through the automated clearinghouse (ACH)
Early withdrawal penalty
Depositor forfeits interest or is assessed a service charge for withdrawing funds from or closing out a time deposit before its maturity date
Electronic bill
Allows users to electronically send and receive bill and payment information using technology
Electronic check presentment (ECP)
Captures an electronic image of the check at the point of sale, which is then processed by banks and clearinghouses
Electronic deposit verification (EDV)
Customer protection security process for opening accounts online
Electronic funds transfer (EFT)
Transfer of money between accounts by consumer electronic systems such as automated teller machines (ATMs) and electronic payment of bills
Encryption
Security technology that scrambles information sent over the Internet or any other insecure connection, such as an internal network
Equal Credit Opportunity Act
Federal law that prohibits discrimination in credit transactions on the basis of race, color, religion, national origin, sex, marital status, age, source of income or the exercise of any right under the Consumer Credit Protection Act
Estate planning
Planning for the orderly handling, disposition and administration of assets that are left behind after an individual's death; includes drawing up a will, setting up trusts and figuring out ways to minimize estate taxes
Extension of credit
Granting of credit in any form
External accounts
Accounts that owned at another financial institution
Federal Deposit Insurance Corp. (FDIC)
An agency of the U.S. government that manages the bank insurance funds, which insure deposits at banks and other qualifying financial institutions up to $100,000 per account ($250,000 on retirement accounts) in interest and principal; mandatory for all nationally chartered banks and all banks that are members of the Federal Reserve System
Fixed rate
Rate of interest that does not vary for the term of the loan or deposit
Float
Amount of time the bank takes to clear or reject (bounce) a check for payment; the time at which funds are debited from the issuer's account
Full payment
Amount of money owed on a single account that, if paid, will reduce the account to a zero balance
Good faith
Standard of conduct between parties meaning honesty in the conduct of the transaction
Grace period
Time allowed a debtor in which legal action will not be undertaken by the creditor when payment is late
Gross income
An individual's total personal income before taking taxes or deductions into account; ALSO a company's revenue minus cost of goods sold (also called gross margin and gross profit)
High balance
Account upon which the outstanding balance exceeds the authorized credit limit
Home equity loan
Line of credit secured by one's home; also known as equity loan or second mortgage
Household Income
Combined gross income of all the members of a household who are 15 years old and older
Indexed rate
Sum of the published index plus the margin (i.e. if the index is 9% and the margin 2.75%, the indexed rate is 11.75%)
Inflation indexed
Benefits that rise over time to offset increases in the cost of living, usually as measured by the Labor Department's consumer price index
Insufficient funds
When an account balance is inadequate to cover a check that has been written and presented for payment
Interest
Cost for borrowing a sum of money, or the amount earned on an interest-bearing deposit account, usually calculated at a percentage rate over a period of time
Interest income
Earnings on investments such as savings accounts, certificates of deposit and money markets
Interest rate
Annual rate paid on an interest-bearing account, such as a savings accounts and CDs, which does not reflect compounding
Interest transfer
Process that allows interest earned in one account to be transferred to another account
Joint account
Bank account held in more than one name, usually by a married couple or partners living at the same address
Late payment fee
Charge imposed on a debtor for not paying on time
Ledger balance
Balance in an account at the beginning of each day; includes all deposits or transactions posted from the previous night, whether or not any money has been collected; also known as the current balance
Line of credit (LOC)
Arrangement between a financial institution, usually a bank, and a customer that establishes a maximum loan balance that the bank will permit the borrower to maintain; borrower can draw down on the line of credit at any time, as long as he or she does not exceed the maximum set in the agreement
Maturity
Date on which the principal balance of a loan becomes due and payable; also marks the date when a bond pays its principal
Minimum average balance to avoid fees
Balance in the account, from day-to-day, must average this amount when calculated; if the account balance falls below this amount, the account holder will be subject to the monthly charge and/or per usage transaction charges
Money market account
High-yield savings account, FDIC-insured, that allows depository financial institutions to be more attractive with money market mutual funds
Money market fund
Mutual fund that invests only in short term securities, such as bankers' acceptances, commercial paper, repurchase agreements and government bills; funds are not federally insured, although the portfolio may consist of guaranteed securities and/or the fund may have private insurance protection
Mortgage loan
Consumer loan secured by residential real estate, usually the borrower's primary residence; may be used to purchase or refinance a home or property, with payments usually spread over 15 to 30 years
Net income (NI)
Individual's income after deductions, credits and taxes are factored into gross income; company's total earnings, reflecting revenues adjusted for costs of doing business, depreciation, interest, taxes and other expenses
Online banking
Service that allows an account holder to obtain account information and perform certain banking transactions through a personal computer
Online bill payment
Service that sends money out of a person's/company's bank account to whoever one wishes
Overdraft protection
Arrangement with bank that allows one to withdraw more than the amount of money in his/her account
Payee
Person or business to whom a check is issued
Payer
Party delivering funds
Periodic rate
Interest rate described in relation to a specific amount of time (i.e. monthly periodic rate is the cost of credit per month; the daily periodic rate is the cost of credit per day)
Phishing
Scam that uses spoofed e-mails from well-known companies to direct consumers to fraudulent Web sites, where victims unknowingly submit sensitive information directly to scammers
Personal identification number (PIN)
Issued with a debit or credit card so that one can withdraw money from ATMs; helps prevent fraud
Points
Fee that mortgage lenders charge borrowers; considered a type of prepaid interest
Prepaid interest
Interest that a debtor pays before the first scheduled debt repayment
Prime rate
Interest rate that commercial banks charge their most credit-worthy customers; rate tends to become standard for the banking industry when a major bank raises or lowers its rate
Principal
Total amount of money being borrowed or lent; original amount invested, separate from earnings; ALSO face value of a bond
Recurring debt
Any payment that occurs on a continuing basis; involves payments that cannot be easily canceled at the payer's request, including alimony or child support and loan payments; is important in a lender's consideration of how much credit one can obtain
Return
Profit earned on an interest bearing account, expressed as an annual percentage yield
Revolving credit
A bank line of credit on which the customer pays a commitment fee and can use funds when they are needed; normally the line involves a firm commitment from the bank for a period of several years
Routing number
First nine numbers that appear at the bottom of a check to identify the financial institution from which funds may be drawn
Secured account
Account against which collateral or other security is held
Service charge
Fees charged to customers for specific services or as a penalty for not meeting certain requirements, such as insufficient funds in a checking account
Simple interest
Interest computed only on the principal balance, without compounding
Secure Socket Layer (SSL)
Encryption system designed to protect a credit card and other details when one shops or banks online
Statement
Detailed record of transactions in a bank customer's account(s) for a certain period, usually each month, which shows debits, credits, transfers, payroll deposits, account balance, check fees, service charges, ATM activity, etc.
Subprime loan
Type of loan that is offered at a higher interest rate than the rate offered on traditional loans; subprime borrowers are often declined by traditional lenders because of low credit ratings or other factors that suggest that they have a reasonable chance of defaulting on the loan
Taxable income
Gross income less deductions
Term
Time to the maturity of a loan or deposit; expressed in months or years
Total value
Present worth of account, factoring all funds, including funds on hold or pending approval
Trusts
Estate-planning tools that can replace or supplement wills, as well as help manage property during one's life
Uncollected funds
Items deposited in an account that have not yet been collected, or paid, by the bank on which they were drawn
Variable rate
Interest rate that may fluctuate during the term of a loan, line of credit or deposit account, according to changes in an index rate, such as the prime rate or other prescribed criteria
Wire transfer
Electronic payment service for transferring funds by wire; transfers are guaranteed funds for the recipient, meaning that the payment cannot be revoked by the sender after the transfer