Banking Vocabulary

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Banking Vocabulary

Annual Percentage Rate (APR)

The interest rate actually paid on a loan over a period of a year.

Annual Percentage Yield (APY)

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

Banking

The business of accepting deposits and making loans including commercial loans.

Budget

An itemized list of probable expenditures and income for a given period of time; a spending plan.

Check Register

A record showing the check number, the person to whom the check is written, the amount of the check, the date the check was written, and the balance in the account.

Closed-end Credit

Credit that will begin and end at specified times.

Collateral

Something of value held by a financial institution as security to guarantee a loan.

Compounding

When the interest paid on a savings account is added to the balance, so the interest earns interest.

Credit

A sum deposited in an account; the ability to borrow money or charge merchandise.

Debit

A sum deducted from an account.

Deposit Slip

A form that is filled out to credit money to a checking or savings account.

Drawee

The financial institution where the account is located.

Electronic Banking

Using computers to carry out transfers of money.

Electronic Funds Transfer (EFT)

A method of crediting or debiting accounts without using checks or deposit slips.

Endorsement

The signature on the back of a check that allows it to be negotiated.

Federal Reserve System

Twelve district Federal Reserve Banks under the direction of policies set by its Board of Governors, appointed by the President of the United States, and fulfilling the functions of a central bank; the central bank of the United States.

Float

The term applied to the time between a transaction and debit.

Free Enterprise System

Freedom of opportunity to pursue any business venture.

Gross Domestic Product (GDP)

The total value of production that takes place per year in a country.

Inflation

A significant and sustained increase in the general level of prices, usually measured by the rate of change in some price index number.

Interest Rate

The amount charged per year on a personal or home loan. The rate varies according to the type of loan. Or, the percentage of interest paid for money in deposit accounts, without regard to compounding, shown as an annual figure.

Liquidity

A measurement of the ease with which an asset may be converted to cash.

Non-bank

A business that may be offering a number of banking services, but that does not meet the legal definition of a bank.

Open-end Credit

Credit that may be used up to a set limit; also called a charge account or revolving credit.

Payee

The person or firm to whom a check is to be paid.

Productivity

The amount of output produced by a unit of resource input during a given span of time.

Recession

A period of a relatively low volume of production and income in an economy.

Reconcilement

The process of bringing a checking account statement and checkbook register into agreement.

Signature Card

A card on file at the financial institution recording signatures of those authorized to access an account.

Stub

The part of a check kept by the person writing the check as a record of a transaction.

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