Basics of taxes
Every industry has its own special language and jargon. Personal finances are no exceptions. Here is a list of banking terms that are good to know about managing money.

Account balance

The total amount of all funds in your account.

Adjustable rate

A rate of interest that can vary during the term of the loan. Usually used when referring to mortgages.

Annual percentage rate (APR)

The interest rate and fees or additional costs you’re charged per year for a loan or credit card. For you as a customer, a lower rate is always better.

Annual percentage yield (APY)

The effective annual rate of return taking into account the compounding of interest on a savings, checking, CD or money market account. On this rate, the higher the better.


Any personal possessions of value. This also includes cash, real estate and investments.

ATM fees

Fees you’re charged for using an out-of-network ATM or exceeding a certain number of ATM transactions for your account, if limited.

Auto loan

A loan for the purchase of a vehicle you pay off over time. This is more expensive than buying a car outright since you’re paying interest, but you also get to use the car while you’re paying for it.

Automated clearing house (ACH)

The electronic network used to transfer money between accounts at different institutions.

Automated Teller Machine (ATM) card

A card that gives you access to your account through an ATM. If it’s a debit card, it will also work at retailers.

Available balance

The amount of funds in your account ready for immediate withdrawal.

Balance due

The payment required on a credit card or HELOC by a specific date. It may include a past-due balance or fees.


An individual, institution, trustee or estate that will receive (or may become eligible to receive) money and/or other benefits upon the death of a certain person. Money and/or benefits are distributed according to the deceased person's will, insurance policy, retirement plan, annuity, trust or other contract.​

Certificate of deposit (CD)

A savings product used to lock in a fixed APY on deposits for a set period, until the maturity date. CDs usually pay higher interest than a savings account.

Checking account

The basic account for easy access to your money. Helpful for managing day-to-day expenses and recurring (monthly) bills.


An increase in a savings or checking account, such as a deposit made to the account. 2. A person or company’s ability to borrow money, with the expectation the money will be paid back in the future.

Credit card

One of the most popular forms of credit, a card that allows you to spend up to a specific limit. Interest on the balance is assessed at the end of the monthly term, so to avoid paying any interest pay off your full balance each month.

Credit limit

The maximum amount you’re allowed to charge on a credit card or HELOC. Once you’ve shown a habit of paying bills consistently on time, a lender may raise your credit limit—giving you more spending power.

Credit rating

An evaluation of credit worthiness based on financial resources and credit history. Strictly speaking, ratings are usually applied to businesses or governments and expressed as a letter grade (A, B+, etc.)

Credit score

In contrast to a credit rating, the credit score is a number (600, 700, etc.) indicating an individual's credit-worthiness. Credit bureaus look at factors such as your total debt, number of open accounts and whether you rent or own your home. A good credit score can result in a lower interest rate for loans.

Current balance

The amount of funds in your account, including any pending activity.


A decrease in a savings or checking account, such as a withdrawal or a check written against the account.

Debit card

An ATM card that allows you to pay for goods at stores or businesses, online, and at ATMs. A debit card draws the money from your checking account, in contrast to a credit card where you’re borrowing the money and have to pay it back later.


Funds added to your account.

Direct deposit

An automatic deposit to your account made by your employer or an outside agency (such as a pension or government benefit payment). These are usually recurring and spare you the hassle of depositing a paper check. Online transfers are not considered direct deposits.

Early withdrawal penalty

A fee for withdrawing funds from an account—or closing it—before its maturity date. This applies to CDs and individual retirement accounts (IRAs).


Electronic bills that are delivered directly to your online banking account for payment instead of being mailed to your home.

Electronic check presentment (ECP)

An electronic image of a check that can be processed by banks and clearing houses instead of the actual paper check.

Electronic deposit verification (EDV)

A way to verify an account at another bank that you want to link to. Many banks will electronically send two micro deposits to your linked account. Once you report the deposit amounts back to the bank, you can transfer funds to and from the linked account. See also: Micro-deposits

Electronic Funds Transfer (EFT)

The transfer of money between accounts through ATMs or electronic payment systems.

EMV chip

Developed as an update to simple magnetic stripe cards. By encrypting data, this feature helps prevent data from being intercepted. EMV stands for “Europay, MasterCard and Visa,” as it was their joint effort that created the standard to ensure the security and global acceptance.

Equal Credit Opportunity Act

A 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.

External accounts

Accounts owned at another financial institution.

Federal Deposit Insurance Corp (FDIC)

An independent agency of the U.S. government that insures bank and thrift institution deposits of up to $250,000 per depositor. Learn more about the FDIC.

Fixed rate

A rate of interest that does not vary for the entire term of the loan or deposit.

Funds on hold

Funds not available until they’re processed.

Home Equity Line of Credit (HELOC)

A line of credit based on the estimated value of your home, or on the amount of equity in your home.

Home Equity Loan

A type of loan that uses the equity of your home as collateral. Typically, a home equity loan allows you to borrow a one-time lump-sum amount of money equal to or less than the equity you have in your home.

Indexed rate

The rate charged for an adjustable rate loan, such as a HELOC, mortgage or credit card.

Insufficient funds

An account balance too low to cover a check presented for payment. Sometimes abbreviated as NSF for "non-sufficient funds."


The cost of borrowing money or the amount earned on a deposit account. To calculate simple interest, multiply the original amount (of your savings or your loan) by the interest rate. For compound interest, the interest is added to the total amount as it accumulates.

Interest income

Your earnings on savings accounts, certificates of deposit and money markets. Banks or other organizations or individuals who pay interest usually report it on Form 1099-INT.

Interest rate

The annual percentage paid on an interest-bearing savings account or CD, or the interest charged on loans. The interest paid on a deposit account is the "annual percentage yield" (APY) and the rate charged on a loan is the "annual percentage rate" (APR).

Interest transfer

A process that allows interest earned on one account to be transferred to another account. For example, the interest earned on a CD can be transferred to a money market account.

Joint account

A bank account held in more than one name. Each person on the account has equal ownership. The primary account holder receives the bank statements and any other correspondence.


For loans, the date that the full balance is due. For CDs, the date the CD funds are available for withdrawal or renewal with interest paid.


Small deposits (usually a dollar or two) made to verify an account you’re trying to link. Once verified, you can use the account you’ve linked to your bank account for actions such as money transfers. Micro-deposits are usually reversed so there’s no permanent change in your balance. See also: EDV

Minimum balance

The amount your average balance in a deposit account must stay above to avoid fees.

Money market account

A high-yield savings account that’s FDIC-insured up to $250,000. In contrast to a CD, with a money market account, you can still have regular access to your funds.

Mortgage loan

A loan used to purchase or refinance a home or real property, with payments usually spread over 10 to 30 years. It’s secured by real estate, such as the borrower's primary residence.

Non-sufficient funds (NSF)

An account balance too low to cover a check presented for payment.

Overdraft protection

An arrangement made between you and your bank that allows you to withdraw more than the balance in your account without incurring any penalties.


A person or business to whom a check is written.

Periodic rate

The interest rate over a specific period of time. A monthly periodic rate is the cost of credit per month. A daily periodic rate is the cost of credit per day, and so forth.

Personal identification number (PIN)

A number issued with your debit or credit card so you can withdraw money from ATMs. To help prevent fraud, keep your PIN secret. A PIN should be memorized, never written down or disclosed to anyone else.

Prime Rate

The interest rate that banks use to establish the indexed rate for certain loan products. The prime rate is published in The Wall Street Journal.

Routing number

The first nine numbers that appear at the bottom of a check to identify the financial institution responsible for holding the account. Learn how to find a routing number on a check.

Savings account

An interest-bearing deposit account used for storing money, like an emergency fund.

Scheduled transfer

Moving money from one account to another on a regular recurring basis, often monthly.

Secure Socket Layer (SSL)

A type of technology that protects your credit card and personal details when you shop or bank online.

Service charge

A charge for a service or 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.


An amount charged by the owner of an ATM. This generally applies to out-of-network ATMs.


The time to the maturity of a loan or deposit. For example, a CD can have a term from 3 to 60 months.

Total value

The current worth of an account, including funds on hold or pending approval.

Variable rate

An interest rate that may fluctuate during the term of a loan, line of credit or deposit account. The new rate is sometimes determined by The Wall Street Journal prime rate. See also “adjustable rate” and “indexed rate.”

Wire transfer

An electronic payment service for transferring funds by wire. Wire transfers are guaranteed funds for the recipient, meaning the payment cannot be revoked by the sender after the transfer.

When it comes to talking about your financial needs, it’s important to choose a financial professional that has good knowledge and experience.
These definitions are for informational purposes only and does not replace or modify the definitions and information contained in individual financial documents or declaration pages, which are controlling.