Glossary

Accrued Interest
Interest on an account which has been accumulated but not yet paid.

Annual Percentage Rate (APR)
The interest rate that reflects the actual cost of credit on a yearly basis expressed as a percentage.

Annual Percentage Yield (APY)
The interest rate that reflects the actual interest earned on a yearly basis expressed as a percentage.

Assets
Items of monetary value (e.g., house, land, car) owned by an individual or company.

Automated Clearing House (ACH)
A facility that processes electronic debit and credit transfer such as Direct Deposit or Automatic Payments.

Automated Teller Machine (ATM)
An electronic device through which customers may perform various banking transactions, including withdrawals and deposits.

Amortization
The process of fully paying off indebtedness by installments of principal and earned interest over a definite time.

Balance
In banking, balance refers to the amount of money in a particular account. In credit, balance refers to the amount owed.

Bounced Check
A check that a bank has refused to cash or pay because you have no funds to cover it in your account.

Buydown
A lump sum payment made to the creditor by the borrower or by a third party to reduce the amount of some or all of the consumer's periodic payments to repay the indebtedness.

Cashier's Check
A check issued by a bank, drawn on its own funds rather than on one of its depositor's funds.

Certificate of Deposit
A form of savings deposit on which a bank pays principal and interest at a stated maturity date. 

Checking Account
Type of account which enables customers to withdraw their own available funds simply by writing a check. 

Clear
A check "clears" when its amount is debited (subtracted) from the payer's account and credited (added) to the payee's account.

Collateral
Anything that a bank accepts as security against the debtor's not repaying a loan. If the debtor fails to repay the loan, the bank is allowed to keep the collateral.

Collateral Assignment of Assessments
As security for a loan extended to a condominium association or HOA, the association collaterally assigns to the lender its right to collect assessments from its members and its right to impose a claim of lien against its members for non-payment of the assessment. It does not become effective unless and until the association defaults with respect to its obligation to the lender.

Compound Interest
Interest calculated not only on the original principal, but also on the interest already accrued.

Creditworthiness
A creditor's measure of a consumer's past and future ability and willingness to repay debts.

Debit Card
A banking card enhanced with ATM (automated teller machine) and POS (point-of-sale) features that can be used to purchase goods and services electronically. The card replaces cash or checks. Transactions are deducted from the cardholder's checking account. 

Demand Deposit Account (DDA)
A checking account.

Direct Deposit
A method of payment which electronically credits your checking, or savings account; most commonly, payroll and government checks.

Default
Failure to meet the terms of a credit agreement.

FDIC
Federal Deposit Insurance Corporation; a federally sponsored corporation which insures deposits in national banks and certain other qualifying financial institutions up to a stated amount.

Insufficient Funds
When a customer's account does not contain enough money to cover a check or withdrawal ticket presented for payment; also referred to as non-sufficient funds (NSF).

Interest
Money paid in return for the use of money.

Lien
The right to hold any property given as a pledge or security until the debt it secures is paid. To constitute a lien, the debt must be enforceable in equity or law; (e.g., a mortgage).

Maturity Date
The date on which a certificate of deposit, bond or other instrument comes due.

Mortgage
A long-term loan obtained by individuals to buy a home that legally transfers ownership from the debtor to the creditor until the debt is paid. 

Non-Sufficient Funds (NSF)
See Insufficient Funds.

Official Check
A check that is (1) drawn on a bank, (2) signed by a bank officer or authorized signer on behalf of the bank as a drawer, (3) a direct obligation of the bank, and (4) provided to a customer of the bank or obtained from the bank for remittance purposes.

Overdraft
A check written for more money than is currently in the account. If the bank refuses to cash the check, it is said to have "bounced."

Principal
The original amount of money borrowed, deposited, or invested before interest accrues.

Point-of-Sale (POS)
Terminals that allow you to pay for retail purchases with your debit card.

Refinance
To revise a loan agreement to make the terms of payment more suitable to a borrower's present income and ability to repay. Refinancing usually provides a lower interest rate and lower monthly payments over a longer period of time.

Service Charge
A monthly fee a bank charges for handling a checking account.

Stop Payment
A request made to a bank to not pay a specific check. If requested soon enough, the check will not be debited from the payer's account. Normally there is a charge for this service.