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The Language of Banking - ABA Education Foundation article

What's new with banking may just seem new because of the banking language. The following is information presented by the American Banking Association.

Arranging for a loan - buying a house or car, starting a business, or opening an account - inevitably exposes you to the language of banking. When dealing with money it's important to know some of the terminology to avoid misinterpretation. Here is a list of some of the most common terms, taken from the American Bankers Association Dictionary, Banking and Finance Terminology.

Cash Advance: A cash loan obtained by a credit cardholder through presentation of the card at a financial institution, ATM, or through a mail receipt.

Certificate of Deposit (CD):  A formal receipt for funds left with a bank as a special deposit. Such deposits may bear interest, in which case they are payable at a definite date in the future and/or after a specified minimum notice of withdrawal. These deposits are payable only upon surrender of the formal receipt, and are properly endorsed.

Credit Rating: A formal evaluation of an individual's loan-repayment history or potential.

Credit Report: A factual data report from an independent agency created to verify the applicant's current employment and income. It also provides information on current and previous debts and liabilities.

Debit Card: A plastic card enabling cardholder to purchase goods and services or make cash withdrawals from an ATM. The cost or amount withdrawn is immediately charged to the cardholde'rs checking account.

Lien: A legal claim or attachment, filed on record, against property as security for payment of an obligation. A lien is the guaranteed right of a lender or investor to specific property in case of default.

Overdraft: The amount by which a debit or charge against an account exceeds the balance of the trust account.

PITI: Principal, interest, taxes and insurance. The components are commonly included in a monthly mortgage payment.

Refinancing: The retirement of existing securities or the repayment of a debt from the proceeds and new borrowings are created.

Secured loan: A loan against which a tangible asset has been pledged in case of default on the loan.

Unsecured loan: Funds loaned with no pledge of collateral.

Yield: The annual percentage rate of return on capital, calculated by dividing annual return by the amount of an investment. 






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