The Language of Banking - ABA Education
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.
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 The cost or amount withdrawn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
PITI: Principal, interest, taxes and
insurance. The components are commonly included in a
monthly mortgage payment.
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.