Glossary of Banking Terms

To accumulate between payments. In a consumer credit transaction; interest charges accumulated from the date one payment is due through the date the next payment is due.

A system for setting balances between banks arising from payments sent or received electronically for depositors instead of being done through checks.

The denial of credit, in the dollar amount or according to the terms requested by the applicant.

The length of time it will take to pay off your loan.

A schedule that shows the amount of principal and interest due for a loan payment. It will also show the loan balance remaining after each payment is made.

A report prepared by an appraiser that estimates the current market value of a property.

This is the cost of credit on a yearly basis expressed as a percentage. The APR results from three factors: The amount financed, the term of the loan, and the finance charge.

The percentage, required by Truth in Savings regulations, to be disclosed on interest-bearing deposit accounts. The APY reflects the total interest to be earned based on an institution’s compounding method, assuming funds remain in the account for a 365-day year.

An electric terminal that can perform many routing banking services for the customer such as cash withdrawals, deposits, and account transfers.

An account where funds from a time deposit are automatically transferred into a checking account to cover presented checks.

The one for whom an account has been established.

Measures the net value of an individual’s assets.

A contract under which the bank agrees to pay the customer the amount deposited plus interest on a specified maturity date.

A central site where banks in one area present checks drawn on each other for collection and exchange. Each participating bank’s balance at the clearing house is adjusted on a net basis to reflect the difference between the value of checks paid and the value of checks collected to and from other banks in the collection arrangement, i.e., to “clear” the day’s transactions.

The costs a borrower must pay when a mortgage loan in completed. These include origination fee, title insurance, attorney’s fees, property survey and prepaid expenses (taxes and insurance).

Assets pledged by a loan client to a lender to guarantee a loan. These assets become the property of the lender if the loan client does not repay the loan.

The senior administrative officer of the Department of the Treasury office responsible for the chartering and supervision of national banks. The agency is known as the Office of the Comptroller of the Currency, or OCC.

A card used to get money, goods, or services using a line of credit established by the card issuer and issued to the cardholder. These cards may be pre-paid.

An automatic deposit of funds from a payer to a checking or savings account. The term is often used to refer to deposits from payroll, Social Security checks, military and civilian salary payment, Civil Service and Railroad Retirement annuity payments, and Veterans Administration compensations and pension payments.

A notice describing the terms and conditions of an account or loan.

This is the number used by organizations for tax reporting and wage withholding purposes.

An account set up during a real estate transaction that the borrower deposits funds to cover payments of taxes and/or insurance.

One of the 12 district Federal Reserve banks responsible for issuing the nation’s currency, namely, Federal Reserve notes. Reserve banks hold most of the reserves that banks are legally required to maintain against deposits. See Appendix A-2.

The central monetary authority for the United States, created by the Federal Reserve Act of 1913. The Federal Reserve System is divided into 12 districts, each having a Reserve bank owned by the member banks in that district. All national banks are members. State chartered banks may become members, and the Board of Governors and the Reserve Banks supervise state members.

The federal government agency that insures accounts at most commercial banks and savings banks. The FDIC also has primary federal supervisory authority over insured state banks that are not members of the Federal Reserve System.

A person acting on behalf or in trust with another. For example, an agent acting on behalf of a principal, an officer on behalf of an organization, or a trustee on behalf of a beneficiary. A fiduciary could be the drawer of a check, a payee, or an endorsee on the check.

A legal process that allows a bank to sell real estate property held as collateral on a mortgage loan if the borrower does not make their payments.

The dollar amount paid by a consumer to a bank in exchange for use of the bank’s money for a certain period of time.

A legal claim that gives a lender the right to take possession of collateral if a borrower does not repay a loan.

This is the process by which characters are imprinted on checks in a form that can be read by machines allowing for high speed processing of checks.

A check or instrument is negotiable when it satisfies all the requirements of U.C.C. 3-302. In summary, a check is negotiated when it is transferred properly. A proper transfer exists when there has been a voluntary delivery of possession of the instrument to another party and the instrument contains all necessary endorsements.

A written promise to pay a specific amount of money according to the terms and conditions described in the note.

The person, including executor or administrator, appointed by a court pursuant to probate proceedings who has the authority to act on behalf of the decedent.

A national market where a financial institution’s mortgage loans (and other loan types) can be bought and sold to other investors.

In the case of individuals this will be the social security number. In the case of organizations, this will be the employer identification number See EIN.

A system in which one or more steps of the transfer of paper checks is replaced by electronic transmitted data. One example is the bank that retains the checks and sends its customer a periodic statement listing all the information. In another system the depositary bank would keep the check and store it and electronically transmit the necessary information from the check to the drawee bank. Some ATM networks also use truncation.

An interest rate that can change during the life of the product it is attached to.

The form the bank files in public records to notify others that it has taken the listed assets (i.e. car, boat) as collateral for a loan.