Glossary of Bank Terms

 

  • ABA Transit Number (also know as the banks routing number) – The ABA transit number is a unique number assigned to each bank by the American Bankers Association to facilitate the sorting and processing of checks.  

 

  • Account Statement – A printed or online statement of all the debt and credit transactions on an account for a given period.

 

  • Accrued Interest – Interest that is earned on an account, but not yet paid. Example – A certificate of deposit that has earned 30 days of interest but a check has not been sent to the customer, or a loan that has accrued interest since the last payment date 20 days ago and is not yet paid.

 

  • Adjustable Rate Mortgage (ARM) – A mortgage on which the rate is subject to periodic adjustments.  The exact method, frequency, and basis for the charge are fully disclosed to the borrower.  ARM rates are usually tied to some widely published market rate of interest or index.  (Example New York Prime).

 

  • Amortization – The gradual scheduled reduction in the principal amount owed on a debt.  During the earlier years, most of each payment is applied toward the interest while payment amounts during the final years are applied almost exclusively to the remaining principal. 

 

  • Annual Percentage Rate (APR) – The annual total cost of interest and other charges and fees related to a loan expressed as a percentage. 

 

  • Annual Percentage Yield (APY) – The total amount of interest paid on a deposit account based on the interest rate and the effect of interest compounding for one year.

 

  • Appraisal – An informed written estimate of the value of property made by an appraiser.

 

  • Appraiser – A person qualified by education, training, and experience to estimate the value of real property.

 

  • Automated Clearing House (ACH) – A nationwide electronic funds transfer network that enables financial institutions to distribute electronic credit and debit entries, such as direct deposit or automatic debits,  to bank accounts and to settle such entries.

 

  • Automatic Funds Transfer – An arrangement that moves funds from one account to another automatically on a pre-arranged schedule.

 

  • Automatic payment – An arrangement that authorizes payments to be deducted automatically from a bank account (usually a checking account) to pay bills.

 

  • Automated Teller Machine (ATM) – A machine where you can withdraw or transfer money from one account to another 24 hours a day.  Use of an ATM requires a card issued by the bank and a personal identification number (PIN).

 

  • Bank Statements – A statement of a customer’s account issued periodically by a bank, usually monthly.  The statement shows the balance at the beginning of the period, all deposits and other credits, all checks and other debts, and the ending balance. 

 

  • Bill Pay - An optional service of Online Banking that allows you to pay your bills online.

 

  • Bounced Check - a check which a bank returns unpaid because there are not enough available funds in the account (NSF, or nonsufficient).

 

  • Business Day Cut-Off – Business Day Cut-off is generally the latest time a transaction is posted to your deposit account that business day.  If you make a transaction after Business Day Cut-off, or on a Saturday, Sunday or bank holiday we will post it to your account on our next business day.

 

  • Cancelled check – A check that has been paid.  A cancelled check or image may generally be used as proof of payment.

 

  • Cashier’s check – A check drawn on and issued by a bank.

 

  • Certificate of Deposit (CD) – A time deposit that is payable at the end of a specified term.  If an early withdrawal from the CD prior to the end of the term is permitted, a penalty is usually assessed.

 

  • Checking account – A type of deposit account, sometimes interest bearing, which enables customer to place funds and withdraw their available funds on demand, typically by writing a check or using a debit card.

 

  • Check Image –Images of the front of your cancelled checks, instead of the original.

 

  • Collateral – An asset, such as a car or a home, used for securing the repayment of a loan.  The borrower risks losing the asset if the loan is not repaid.

 

  • Collection – The efforts used to bring a delinquent loan current and, if necessary, to file legal papers and notices to proceed with foreclosure.

 

  • Compound Interest – Interest that is calculated not only on the principal balance in the account, but also on the accumulated interest.  The more frequently interest is compounded, the higher the effective yield.

 

  • Corporation or LLC – A business organization that is treated as a single legal entity and is owned by its stockholders, whose liability is generally limited to the extent of their investment.  The ownership of a corporation is represented by shares of stock. 

 

  • Credit – A financial term that refers to an increase in a deposit account balance (such as a deposit made to the account).

 

  • Credit Bureau/Credit Reporting Agency - An organization that gathers, records, updates, and stores financial and public records of individuals who have been granted credit, and provides this information to lenders and other authorized users for a fee.

 

  • Credit Rating/Credit Score – A numeric expression of creditworthiness based upon an individual’s present financial condition and past credit history.

 

  • Credit Report – A record of an individual’s debts and payment habits.  It helps a lender determine whether or not a potential borrower is a good business risk.

 

  • Debit – A financial term that refers to a decrease in a deposit account balance, such as a check posted to the account.

 

  • Debit Card – A plastic card issued by CBBC that customers can use anywhere Visa debit cards are accepted.  A Debit Card can also be used at ATMs so there is no need to carry both a Debit Card and an ATM Card.

 

  • Debt-to-income - The percentage of your gross monthly income (before taxes are taken out) that you pay toward debt (mortgage loans, car loans, credit cards, and any other monthly payment you might have).

 

  • Deed (Warranty or quit-claim) – A document that legally transfers ownership of real estate from a seller to a buyer. It is delivered to the buyer at closing.

 

  • Deed of Trust – A legal document giving a lender a lien on real estate to secure repayment of a loan.  Also called mortgage and/or security deed.

 

  • Deposit – Money added into a customer’s account at a financial institution.

 

  • Direct deposit –Recurring deposits are made electronically into your checking, savings or money market account, such as salary, pension, Social Security and SSI benefits, or other regular monthly income.

 

  • Dormant account – A bank account in which there have not been any transactions for an extended period of time. 

 

  • Electronic Funds Transfer (EFT) – Any transfer of funds initiated by electronic means, such as a telephone, computer, ATM, ACH, or wire transfer.

 

  • Embossed – Printed customer name on a bank card in the form of raised impressions.

 

  • Endorsement – The signature, placed on the bank of a negotiable instrument (usually a check), that transfers the instrument to another party and legally implies that the endorser has the right to transfer the instrument.

 

  • Federal Deposit Insurance Corporation (FDIC) – The FDIC is an independent agency of the United States government.  The FDIC protects depositors against the loss of their insured deposits if a FDIC-insured bank or savings association fails. 

 

  • Flood Insurance – Insurance that protects against loss due to floods.  When available, this type of insurance is required by law when a property is located within a special flood hazard zone.

 

  • Flood zone – Areas designated by FEMA (Federal Emergency Management Agency) as subject to flooding under certain conditions.  Lenders may not make a loan secured by real estate within this area unless flood insurance is provided.

 

  • Foreclosure – A legal procedure in which property securing a defaulted loan is sold by the lender in order to repay a borrower’s loan.  If the amount paid by a buyer at the foreclosure is not enough to fully repay the loan,  the borrower may continue to owe the lender the difference.

 

  • Hold – Deposit holds are delays to the availability of a portion of deposited checks.  If you receive one, you will receive a notice with the reason and the new date the funds will be available. 

 

  • Identity theft – When a person or group gathers enough information about you to successfully impersonate you online, by mail, telephone or in person.

 

  • Inactive account – See Dormant Account

 

  • Index Rate – A rate on which variable rate loans and mortgages are based.  The rate is usually published in newspapers periodically, such as the prime rate. 

 

  • Interest bearing – An account that earns interest is an interest bearing account.

 

  • Interest rate – The rate paid on an interest bearing account, such as savings, CDs and some checking accounts; also, the rate charged on a loan or line of credit.

 

  • Joint account – Any account owned by two or more people.

 

  • Late Charge – The penalty charged to the borrower when a loan payment is made past the due date or any allowable grace period.

 

  • Lien – A legal claim or attachment filed on record against property, as security for the payment of a loan. 

 

  • Loan – A sum of borrowed money (principal) that is repaid over a set period of time with interest. 

 

  • Loan-to-value – The ratio between the unpaid principal amount of the loan and the appraised value of the collateral securing that loan, expressed as a percentage.

 

  • Maturity date – The date on which a loan, or other financial instrument is due and payable.

 

  • Minimum daily balance – The lowest end-of-day balance in an account during a statement cycle.  It is often required to be kept in an account each day to earn interest, avoid a service charge or qualify for special services.

 

  • Money market deposit account – A savings account that generally permits up to six withdrawals by check or debt card each statement cycle.

 

  • Nonsufficient funds /NSF – A check or item drawn against an account that exceeds the amount of funds in the account. 

 

  • Note –  See Loan

 

  • Offset – The bank’s legal right to seize any funds that a guarantor or debtor may have on deposit, to cover a loan in default.

 

  • Online Banking – A service that allows an account holder to obtain account information and manage certain banking transactions, including bill payment through a personal computer.

 

  • Origination fee – A fee charged by a lender to cover certain processing expenses in connection with making a loan.  Usually a percentage of the amount loaned.

 

  • Outstanding check – A check written by a depositor that has not yet been paid by the depositor’s bank.

 

  • Overdraft – An overdraft occurs when you do not have enough available funds in your account to cover a check or other withdrawal, but the bank pays the items and places your account in a negative balance.

 

  • Overdraft Protection – A pre-approved amount that may be used to pay your checks even when you don’t have enough money in your checking account to cover them.  There is normally a fee associated with each check paid under the program.

 

  • Partnership – An association of two or more persons for the conduct of an enterprise other than in corporate form.

 

  • Personal identification number (PIN) – PINs are numbers that customers use with their ATM or Debit Card to access their accounts using an ATM or to make purchases with their Debit Card.  These numbers should always be kept confidential.

 

  • Prime Rate – A benchmark, or base rate,  that a bank establishes from time to time and uses in computing an appropriate rate of interest for a loan. 

 

  • Recording fee – A charge for recording a deed or security instrument.

 

  • Refinancing – Paying off one loan with the proceeds from another loan, generally using the same property as collateral.

 

  • Returned Item –  See Bounced Check

 

  • Savings account – A deposit account which pays interest, but funds cannot be withdrawn by check writing.

 

  • Second Mortgage/Second Lien – A home loan that is not a first mortgage, such as a home equity loan or home equity line of credit.

 

  • Secured Loan – A loan for which you give the lender a lien on property such as an auto, boat, or other personal property or real estate that will serve as collateral for the loan.  If you default, the lender can sell the collateral to satisfy the debt.

 

  • Short Sale – A commonly used alternative to a foreclosure.  If a homeowner can no longer afford to make mortgage payments and their home is worth less than they owe, a short sale allows them to sell the home to pay off the mortgage.  In a short sale, the lender agrees to accept an amount less than is actually owed on the loan, based on financial hardship.

 

  • Sole Proprietor – A business owned and operated by one person.

 

  • Stop payment – When you ask a bank not to pay a check or payment you have written or authorized, generally on lost or stolen checks or related to disputed purchases.  Stop payment orders generally expire after six months and a fee usually applies.

 

  • Survey – A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, right of way, encroachments, and other physical features.

 

  • Tax Lien – A lien against a property for unpaid taxes.

 

  • Time Deposits – An account for a fixed term with the understanding that the funds will remain on deposit until the end of the term.  Penalties for early withdrawals may apply.

 

  • Title Search – An examination of records used to determine the legal ownership of property and all liens and encumbrances on it.  Usually performed by a title company or attorney.

 

  • Transfer – A movement of funds from one account to another.

 

  • Underwriting – The lender’s process of deciding whether to make a loan to a potential borrower based on credit, employment, assets, and other factors, and the matching of this risk to an appropriate rate, term, and loan amount.

 

  • Variable rate – An interest rate that may fluctuate during the term of a loan, line of credit or deposit account.  Sometimes the rate changes based on changes in an index rate, such as the prime rate or other prescribed criteria. 

 

  • Wire transfer – An electronic payment service for transferring fund by wire from one financial institution to another.

 

  • Withdrawal – A removal of funds from an account.