Glossary of Banking Terms
ACH (Automated Clearing House) - A type of electronic funds transfer system that operates within a US nationwide network between banks and individual consumers.
Affidavit - A sworn statement in writing before a proper official, such as a notary public.
Anti-Money Laundering (AML) – Rules, regulations, and processes aimed at preventing criminals from committing financial crimes.
ATM (Automated Teller Machine) – A machine, activated by a magnetically encoded card or other medium, that can process a variety of banking transactions, such as withdrawing cash, depositing checks or making balance inquiries.
Bankruptcy – When someone is declared bankrupt, it means officially that they are unable to pay their debts and what assets they do have are seized in order to try and repay their creditors.
Blue chip – Adjective used to describe high quality and specifically in the banking world to describe stocks which are a reliable investment.
Business Bank Account – An account that helps an entrepreneur keep business transactions separate from personal ones.
Capital Markets – The financial system which raises capital by dealing in shares, bonds and long term investments.
Cash Equivalents – Highly liquid accounts holding funds that can be accessed immediately without penalty or risk of loss.
Central Bank Digital Currency (CBDC) – A digital currency issued by a central bank, which can be used as a legal tender alongside traditional physical currencies like banknotes and coins.
Commercial Bank – A commercial bank acts as a financial intermediary that provides various products and services to businesses, performing crucial liquidity functions within an economy.
Credit Limit – The maximum amount of credit that is available on a credit card or other line of credit account.
Credit Rating – An evaluation of credit worthiness based on financial resources and credit history.
CVV (Card Verification Value) – An anti-fraud security feature that helps verify that you are in possession of your credit card and making the transaction.
Digital Credit Card – A virtual version of a physical credit card that allows for online transactions.
Digital Currency – A type of currency that only exists electronically and allows people to make payments directly to each other through an online system.
Electronic Banking – Also known as internet, web, or online banking, is a convenient and secure way to manage your finances from anywhere with an internet connection.
Electronic Funds Transfer (EFT) – A method of transferring funds between banks, businesses or individual people.
Fiat Money – A government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it.
Foreign Currency – Money that’s used in a country other than your own.
Forex (Foreign Exchange) – A global, decentralized market in which currencies are traded.
Gold Standard – A monetary system in which the standard economic unit of account is based on a fixed quantity of gold.
Grace Period – A certain amount of time when a borrower can delay making a payment on a loan or credit card account without paying a penalty or incurring interest charges.
Hard Currency – A currency that people trust, because they expect it to maintain its value.
IBAN (International Bank Account Number) – An identification code for bank accounts that is used globally.
Inflation – An increase in prices which means that the purchasing power of money falls.
Interest – Used to describe the cost of using money, a right, share, or title in property.
Interest Income – Earnings on savings accounts, certificates of deposit and money markets.
Investment Bank – Helps individuals and businesses with their complex financial needs, such as mergers and acquisitions or raising capital through investment.
Joint Account – An account with two or more owners.
Kiting – A fraudulent use of a financial instrument to obtain additional credit that is not authorized.
Know Your Customer (KYC) – An important due-diligence process to ensure that customers deal only in legitimate banking operations and not in money laundering or fraud.
Liquidity – The measure of how quickly an investment can be turned into cash.
Mastercard – A payment network that processes card transactions worldwide when you use a credit, debit, or pre-paid card.
Metal Credit Card – A credit card made of metal, typically stainless steel.
Mobile Banking – A service provided by banks and financial institutions that allows you to do your banking on your smartphone or tablet.
Money Laundering – A customer uses banking channels to cover up his suspicious and unlawful financial activities.
Nominal Interest Rate – An interest rate that you agree on when you take out a loan, without taking into consideration the effects of inflation.
Non-sufficient Funds (NSF) – An account balance too low to cover a check presented for payment.
Online Banking – The digital version of all the financial services that a traditional bank can offer.
Open-End Credit – A credit agreement that allows a customer to borrow against a pre-approved credit line when purchasing goods and services.
Outstanding Check – A check written by a depositor that has not yet been presented for payment to or paid by the depositor's bank.
Overdraft – Occurs when you make a purchase with your debit card or write a check for an amount that exceeds your checking account’s available balance.
Peer-to-Peer (P2P) – A payment method that allows you to instantly transfer funds from your bank account to another account over the internet.
Personal Identification Number (PIN) – A code to access and operate a payment account or your bank card.
POS (Point of Sale) – An in-store terminal where you make a payment for something you buy.
Prepaid Card – A card that you use for purchases just like a normal credit or debit card, but the money you spend has already been pre-loaded on the card.
Prime Rate – The interest rate that banks use to establish the indexed rate for certain loan products.
Quarter – Three months of the financial calender, often used as a basis for reporting performance and normally expressed as Q1, Q2, Q3, and Q4.
Refinancing – Replacing an existing loan with a new loan that offers better terms and conditions, such as a lower interest rate or fees.
Reserve Currency – A large amount of currency held by central banks and major financial institutions to use for international transactions.
Retail Banking – Banking that provides financial services to individual consumers rather than businesses.
Routing Number – The first nine numbers that appear at the bottom of a check to identify the financial institution responsible for holding the account.
Safe Deposit Box – A type of safe located inside a bank vault and rented to customers for their use in storing valuable items.
SEPA (Single Euro Payments Area) – European payment system that allows individuals, businesses, and other economic agents to send and receive payments in euros.
Solvency – Refers to a company's ability to meet its long-term financial obligations and debts.
SSL (Secure Socket Layer) – A type of technology that protects your credit card and personal details when you shop or bank online.
State Bank – A bank that is chartered by that State to conduct the business of banking.
SWIFT Code (Society for Worldwide Interbank Financial Telecommunications) – A code that contains 11 characters as a form of bank identification which helps facilitate international wire transfers.
Tier 1 Capital – A bank’s core capital, opposed to Tier 2 capital, which is an element used to measure a bank’s total capital base.
Time Deposit – A money deposit at a bank that cannot be withdrawn for a certain period of time.
Transaction Account – A bank account from which payments can be made to a third party.
Universal Banking – A banking system that offers a wide range of banking and financial services compared to traditional banking institutions.
Usury – Loaning money at exorbitant interest rates.
Variable Interest Rate – An interest rate that changes on a periodic basis.
Virtual Card – A digital version of your payment card which is stored in the digital wallet.
Visa – An electronic payment solution that processes transactions worldwide when you use your credit, debit, or pre-paid card.
Wire Transfer – A domestic or international electronic payment that is made across a network of banks or transfer agencies.
World Bank – An organization affiliated with the United Nations dedicated to aiding developing nations by providing finance, advice and research.
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