Glossary of Terms
A key step toward understanding your financial situation is understanding the financial terms. With this knowledge, you’ll no longer be stumped by terms such as IRA, money market or dividend.
A
Account Agreement:
The contract governing your open-end credit account, it provides information on changes that may occur to the account.
Account History:
The payment history of an account over a specific period of time, including the number of times the account was past due or over limit.
Account Holder:
Any and all persons designated and authorized to transact business on behalf of an account. Each account holder's signature needs to be on file with the bank.
Accrued Interest:
Interest that has been earned but not yet paid.
Adjustable-Rate Mortgages (ARMS):
Also known as variable-rate mortgages. The initial interest rate is usually below that of conventional fixed-rate loans. The interest rate may change over the life of the loan as market conditions change. There is typically a maximum (or ceiling) and a minimum (or floor) defined in the loan agreement. If interest rates rise, so does the loan payment. If interest rates fall, the loan payment may as well.
Adverse Action:
Under the Equal Credit Opportunity Act, a creditor's refusal to grant credit on the terms requested, termination of an existing account, or an unfavorable change in an existing account.
Adverse Action Notice:
The notice required by the Equal Credit Opportunity Act advising a credit applicant or existing debtor of the denial of their request for credit or advising of a change in terms considered unfavorable to the account holder.
Affidavit:
A sworn statement in writing before a proper official, such as a notary public.
Alteration:
Any change involving an erasure or rewriting in the date, amount, or payee of a check or other negotiable instrument.
Amortization:
The process of reducing debt through regular installment payments of principal and interest that will result in the payoff of a loan at its maturity.
Annual Percentage Rate (APR):
The cost of credit on a yearly basis, expressed as a percentage.
Annual Percentage Yield (APY):
A percentage rate reflecting the total amount of interest paid on a deposit account based on the interest rate and the frequency of compounding for a 365-day year.
Annuity:
A life insurance contract sold by insurance companies, brokers, and other financial institutions. It is usually sold as a retirement investment. An annuity is a long-term investment and can have steep surrender charges and penalties for withdrawal before the annuity's maturity date. (Annuities are not FDIC insured.)
Antivirus Software:
A computer software program that detects and responds to viruses and worms, blocking access to infected files and performing frequent updates.
Appraisal:
The act of evaluating and setting the value of a specific piece of personal or real property.
Authorization:
The issuance of approval, by a credit card issuer, merchant, or other affiliate, to complete a credit card transaction.
Automated Clearing House (ACH):
A computerized facility used by member depository institutions to electronically combine, sort, and distribute inter-bank credits and debits. ACHs process electronic transfers of government securities and provided customer services, such as direct deposit of customers' salaries and government benefit payments (i.e., social security, welfare, and veterans' entitlements), and preauthorized transfers.
Automated Teller Machine (ATM):
A machine, activated by a magnetically encoded card or other medium, that can process a variety of banking transactions. These include accepting deposits and loan payments, providing withdrawals, and transferring funds between accounts.
Automatic BillPay:
A checkless system for paying recurring bills with one authorization statement to a financial institution. Necessary debits and credits are made through an Automated Clearing House (ACH).
Available Balance:
The balance of an account less any hold, uncollected funds, and restrictions against the account.
Available Credit:
The difference between the credit limit assigned to a cardholder account and the present balance of the account.
B
Balance Transfer:
The process of moving an outstanding balance from one credit card to another. Typically done to obtain a lower interest rate on the outstanding balance.
Bank Statement:
Periodically the bank provides a statement of a customer's deposit account. It shows all deposits made, all checks paid, and other debits posted during the period (usually one month), as well as the current balance.
Bankrupt:
A bankrupt person, firm, or corporation has insufficient assets to cover their debts. The debtor seeks relief through a court proceeding to work out a payment schedule or erase debts. In some cases, the debtor must surrender control of all assets to a court-appointed trustee.
Bankruptcy:
The legal proceedings by which the affairs of a bankrupt person are turned over to a trustee or receiver for administration under the bankruptcy laws. There are two types of bankruptcy:
Involuntary bankruptcy: One or more creditors of an insolvent debtor file a petition having the debtor declared bankrupt.
Voluntary bankruptcy: The debtor files a petition claiming inability to meet financial obligations and willingness to be declared bankrupt.
Beneficiary:
A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract.
Billing Cycle:
The time interval between the dates on which regular periodic statements are issued.
Billing Error:
A charge that appears on a periodic statement associated with an extension of credit (e.g., credit card) that was not authorized by the cardholder or the cardholders' designee, is not properly identified, and was not accepted by the cardholder or the cardholder's designee.
Bond, U.S. Savings:
Savings bonds are issued in face value denominations by the U.S. Government in denominations ranging from $50 to $10,000. They are typically long-term, low-risk investment tools.
Browser:
A computer software program that is used to view and interact with internet material on the World Wide Web. Google Chrome and Apple Safari are two of the most popular browsers.
C
Canceled Check:
A check that a bank has paid, charged to the account holder's account, and then endorsed. Once canceled, a check is no longer negotiable.
Cashier's Check:
A check drawn on the funds of the bank, not against the funds in a depositor's account. However, the depositor paid for the cashier's check with funds from their account. The primary benefit of a cashier's check is that the recipient of the check is assured that the funds are available.
Cease and Desist Letter:
A letter requesting that a company stops the activity mentioned in the letter.
Certificate of Deposit:
A negotiable instrument issued by a bank in exchange for funds, usually bearing interest, deposited with the bank.
Certificate of Release:
A certificate signed by a lender indicating that a mortgage has been fully paid and all debts satisfied.
Certified Check:
A personal check drawn by an individual that is certified (guaranteed) to be good.
Check:
A written order instructing a financial institution to pay immediately on demand a specified amount of money from the check writer's account to the person named on the check or, if a specific person is not named, to whomever bears the check to the institution for payment.
Check 21 Act:
Check 21 is a Federal law that is designed to enable banks to handle more checks electronically, which is intended to make check processing faster and more efficient. Check 21 is the short name for the Check Clearing for the 21st Century Act, which went into effect on October 28, 2004.
Closed-End Credit:
Generally, any credit sale agreement in which the amount advanced, plus any finance charges, is expected to be repaid in full by a specified date. Most real estate and automobile loans are closed-end agreements.
Closed-End Loan:
Generally, any loan in which the amount advanced, plus any finance charges, is expected to be repaid in full by a specified date. Most real estate and automobile loans are closed-end loans.
Closing Costs:
The expenses incurred by sellers and buyers in transferring ownership in real property. The costs of closing may include the origination fee, discount points, attorneys' fees, loan fees, title search and insurance, survey charge, recordation fees, and the credit report charge.
Collateral:
Assets that are offered to secure a loan or other credit. For example, if you get a real estate mortgage, the bank’s collateral is typically your house. Collateral becomes subject to seizure on default.
Collection Agency:
A company hired by a creditor to collect a debt that is owed. Creditors typically hire a collection agency only after they have made efforts to collect the debt themselves, usually through letters and telephone calls.
Consumer Reporting Agency:
An agency that regularly collects or evaluates individual consumer credit information or other information about consumers and sells consumer reports for a fee to creditors or others. Typical clients include banks, mortgage lenders, credit card companies, and other financing companies.
Conventional Fixed Rate Mortgage:
A fixed-rate mortgage offers you a set interest rate and payments that do not change throughout the life, or "term," of the loan.
A conventional fixed-rate loan is fully paid off over a given number of years-usually 15, 20, or 30. A portion of each monthly payment goes towards paying back the money borrowed, the "principal"; the rest is "interest."
Co-Signer:
An individual who signs the note of another person as support for the credit of the primary signer and who becomes responsible for the obligation. (Also known as a Co-maker.)
Credit Application:
A form to be completed by an applicant for a credit account, giving sufficient details (residence, employment, income, and existing debt) to allow the seller to establish the applicant's creditworthiness. Sometimes, an application fee is charged to cover the cost of loan processing.
Credit Bureau:
An agency that collects individual credit information and sells it for a fee to creditors so they can make a decision on granting loans. Typical clients include banks, mortgage lenders, credit card companies, and other financing companies. Also commonly referred to as a consumer reporting agency or a credit-reporting agency.
Credit Limit:
The maximum amount of credit that is available on a credit card or other line of credit account.
Credit Report:
A detailed report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.
Credit Score:
A number, roughly between 300 and 850, that measures an individual's credit worthiness. The most well-known type of credit score is the FICO® score. This score represents the answer from a mathematical formula that assigns numerical values to various pieces of information in your credit report. Banks use a credit score to help determine whether you qualify for a particular credit card, loan, or service.
Cut-Off Time:
A time of day established by a bank for receipt of deposits. After the cut-off time, deposits are considered received on the next banking day.
D
Debit:
A debit may be an account entry representing money you owe a lender or money that has been taken from your deposit account.
Debit Card:
A debit card allows the account owner to access their funds electronically. Debit cards may be used to obtain cash from automated teller machines or purchase goods or services using point-of-sale systems. The use of a debit card involves immediate debiting and crediting of consumers' accounts.
Debt Collector:
Any person who regularly collects debts owed to others.
Debt-to-Income Ratio (DTI):
The percentage of a consumer’s monthly gross income that goes toward paying debts. Generally, the higher the ratio, the higher the perceived risk. Loans with higher risk are generally priced at a higher interest rate.
Deferred Payment:
A payment postponed until a future date.
Demand Deposit:
A deposit of funds that can be withdrawn without any advance notice.
Deposit Slip:
An itemized memorandum of the cash and other funds that a customer presents to the bank for credit to his or her account.
Derogatory Information:
Data received by a creditor indicating that a credit applicant has not paid his or her accounts with other creditors according to the required terms.
Direct Deposit:
A payment that is electronically deposited into an individual's account at a depository institution.
Disclosures:
Certain information that Federal and State laws require creditors to give to borrowers relative to the terms of the credit extended.
Draft:
A signed, written order by which one party (the drawer) instructs another party (the drawee) to pay a specified sum to a third party (the payee), at sight or at a specific date. Typical bank drafts are negotiable instruments and are similar in many ways to checks.
Drawer:
The person who writes a check or draft instructing the drawee to pay someone else.
Dumpster Diving:
Thieves rummage through trash looking for bills or other paper that includes your personal information.
E
Electronic Banking:
A service that allows an account holder to obtain account information and manage certain banking transactions through a personal computer via the financial institution's website. (This is also known as internet or online banking.)
Electronic Check Conversion:
Electronic check conversion is a process in which your check is used as a source of information-for the check number, your account number, and the number that identifies your financial institution. The information is then used to make a one-time electronic payment from your account - an electronic fund transfer. The check itself is not the method of payment.
Electronic Funds Transfer (EFT):
The transfer of money between accounts by consumer electronic systems - such as automated teller machines (ATMs) and electronic payment of bills-rather than by check or cash. (Wire transfers, checks, drafts, and paper instruments do not fall into this category.)
Encoding:
The process used to imprint or inscribe MICR characters on checks, deposits, and other financial instruments. Magnetic Ink Character Recognition (MICR) is a character-recognition technology adopted mainly by the banking industry to facilitate the processing of checks. Each check in encoded at the bottom with the dollar amount of the check. If that information is entered incorrectly, there is an encoding error.
Encryption:
A process in which data is scrambled before it is transferred so that it cannot be read by unauthorized parties.
Enforcement Action:
A regulatory tool that the OCC may use to correct problems or effect change in a national bank.
Enhanced Security Login :
Provides security at login, no matter what computer you sign in from, using additional end user authentication that helps to protect against online fraud.
Equal Credit Opportunity Act (ECOA):
Prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, or because an applicant receives income from a public assistance program.
Escrow:
A financial instrument held by a third party on behalf of the other two parties in a transaction. The funds are held by the escrow service until it receives the appropriate written or oral instructions - or until obligations have been fulfilled. Securities, funds, and other assets can be held in escrow.
Estate Account:
An account held in the name of a decedent that is administered by an executor or administrator of the estate.
F
Fair and Accurate Credit Transactions Act of 2003 (FACT Act or FACTA):
The purpose of this Act is to help consumers protect their credit identities and recover from identity theft. One of the key provisions of this Act is that consumers can request and obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies (Equifax, Experian, and TransUnion). AnnualCreditReport.com provides consumers with the secure means to request their free credit report.
Fair Credit Reporting Act (FCRA):
A federal law, established in 1971 and revised in 1997, that gives consumers the right to see their credit records and correct any mistakes. The FCRA regulates consumer credit reporting and related industries to ensure that consumer information is reported in an accurate, timely, and complete manner. The Act was amended to address the sharing of consumer information with affiliates.
Federal Deposit Insurance Corporation (FDIC):
A government corporation that insures the deposits of all national and State banks that are members of the Federal Reserve System.
Federal Reserve System:
The central bank of the United States. The Fed, as it is commonly called, regulates the U.S. monetary and financial system. The Federal Reserve System is composed of a central governmental agency in Washington, D.C. (the Board of Governors) and twelve regional Federal Reserve Banks in major cities throughout the United States.
Fiduciary:
Undertaking to act as executor, administrator, guardian, conservator, or trustee for a family trust, authorized trust, or testamentary trust, or receiver or trustee in bankruptcy.
Finance Charge:
The total cost of credit a customer must pay on a consumer loan, including interest. The Truth in Lending Act requires disclosure of the finance charge.
First Mortgage:
A real estate loan that is in a first lien position, taking priority over all other liens. In case of a foreclosure, the first mortgage will be repaid before any other mortgages.
Firewall:
A gateway supported by hardware or software that limits access between computer networks. Firewalls can protect your home computer from hackers and your family from websites that may contain offensive material.
Fixed-Rate Loan:
The interest rate and the payment remain the same over the life of the loan. The consumer makes equal monthly payments of principal and interest until the debt is paid in full.
Fixed-Rate Mortgage:
A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.
Foreclosure:
A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default.
Foreign Transaction Fees:
A fee assessed by your bank for making a transaction at another bank's ATM.
Fraud Alert:
(1) A key provision of the Fair and Accurate Credit Transactions Act of 2003 is the consumer's ability to place a fraud alert on their credit record. A consumer would use this option if they believe they were a victim of identity theft. (2) The alert requires any creditor that is asked to extend credit to contact the consumer by phone and verify that the credit application was not made by an identity thief.
Freedom of Information Act (FOIA):
A Federal law that mandates that all the records created and kept by Federal agencies in the executive branch of government must be open for public inspection and copying. The only exceptions are those records that fall into one of nine exempted categories listed in the statute.
Frozen Account:
(1) An account on which funds may not be withdrawn until a lien is satisfied and a court order or other legal process makes the account available for withdrawal (e.g., the account of a deceased person is frozen pending a court order distributing the funds to the new lawful owners). (2) An account may also be frozen when there is a dispute regarding the true ownership of an account. The bank will freeze the account to preserve the existing funds until legal action can determine the lawful owner.
Furnisher:
An entity that provides information about a consumer to a consumer-reporting agency for inclusion in a consumer report.
G
Garnishment/Garnish:
A legal process that allows a creditor to remove funds from your bank account to satisfy a debt that you have not paid. If you owe money to a person or company, they can obtain a court order directing your bank to take money out of your account to pay off your debt.
Guarantor:
A party who agrees to be responsible for the payment of another party's debts should that party default.
H
Hacker :
A person who tries to gain unauthorized access to a computer system. Hackers are known to modify computer programs and security systems that protect home and office computers.
Hold:
Used to indicate that a certain amount of a customer's balance may not be withdrawn until an item has been collected, or until a specific check or debit is posted.
Home Equity Line of Credit (HELOC):
A line of credit secured by the equity in a consumer's home. It can be used for home improvements, debt consolidation, and other major purchases. Interest paid on the loan is generally tax deductible (consult a tax advisor to be sure). The funds may be accessed by writing checks against the line of credit or by getting a cash advance.
Home Equity Loan:
A home equity loan allows you to tap into your home's built-up equity, which is the difference between the amount that your home could be sold for and the amount that you still owe. Homeowners often use a home-equity loan for home improvements, to pay for a new car, or to finance their child's college education. The interest paid is usually tax-deductible. Because the loan is secured by your home's equity, if you default, the bank may foreclose on your house and take ownership of it. This type of loan is sometimes referred to as a second mortgage or borrowing against your home.
I
Inactive Account:
An account that has little or no activity; neither deposits nor withdrawals having been posted to the account for a significant period of time.
Index-linked Certificate of Deposit:
An index-linked CD is a deposit obligation of the issuing bank and is often sold through bank branches and affiliated and unaffiliated brokers. Index-linked CDs provide the investor the ability to participate in the appreciation, if any, of a particular index, during the term of the CD. Index-linked CDs may have complicated payout structures and may not be suitable or appropriate for all investors. Investors should carefully review the investment risk considerations detailed in the relevant offering documents and disclosure statements. Index-linked CDs are not securities and are not registered under securities laws.
Individual Retirement Account (IRA):
A retirement savings program for individuals to which yearly tax-deductible contributions up to a specified limit can be made. The amount contributed is not taxed until withdrawn. Withdrawal is not permitted without penalty until the individual reaches age 59 1/2.
Insufficient Funds:
When a depositor's checking account balance is inadequate to pay a check presented for payment.
Insured Deposits:
Deposits held in financial institutions that are guaranteed by the Federal Deposit Insurance Corporation (FDIC) against loss due to bank failure.
Interest:
The term interest is used to describe the cost of using money, a right, share, or title in property.
Interest Rate:
The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures.
Interest Rate Index:
A table of yields or interest rates being paid on a debt that is used to determine interest-rate changes for adjustable-rate mortgages and other variable-rate loans.
J
Joint Account:
An account owned by two or more persons. Either party can conduct transactions separately or together as set forth in the deposit account contract.
K
Keystroke Capture :
A spyware program or device that records what users type on their computer. Also referred to as Keystroke Logger.
Kiting:
Writing a check in an amount that will overdraw the account but making up the deficiency by depositing another check on another bank. For example, mailing a check for the mortgage when your checking account has insufficient funds to cover the check, but counting on receiving and depositing your paycheck before the mortgage company presents the check for payment.
L
Late Charge:
The fee charged for delinquent payment on an installment loan, usually expressed as a percentage of the loan balance or payment. Also, a penalty imposed by a card issuer against a cardholder's account for failing to make minimum payments.
Lender:
An individual or financial institution that lends money with the expectation that the money will be returned with interest.
Lien:
Legal claim against a property. Once the property is sold, the lien holder is then paid the amount that is owed.
Line of Credit:
A pre-approved loan authorization with a specific borrowing limit based on creditworthiness. A line of credit allows borrowers to obtain a number of loans without re-applying each time as long as the total of borrowed funds does not exceed the credit limit.
M
Malware:
Also known as 'malicious software," malware is designed to harm, attack or take unauthorized control over a computer system. See Virus, Trojan and Worm.
Maturity:
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.
Minimum Balance:
The amount of money required to be on deposit in an account to qualify the depositor for special services or to waive a service charge.
Money Market Deposit Account:
A savings account that offers a higher rate of interest in exchange for larger than normal deposits. Insured by the FDIC, these accounts have limits on the number of transactions allowed and may require higher balances to receive the higher rate of interest.
Money Market Fund:
An open-ended mutual fund that invests in short-term debts and monetary instruments such as Treasury bills and pays money market rates of interest. Money market funds usually offer check writing privileges. They are not insured by the FDIC.
Mortgage:
A debt instrument used in a real estate transaction where the property is the collateral for the loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to pay off the loan.
Mortgage Insurance:
An insurance policy which compensates lenders or investors for losses due to the default of a mortgage loan. Mortgage insurance can be either public or private, depending on the insurer.
Mortgage Loan:
A loan made by a lender to a borrower for the financing of real property.
Mutual Fund:
A fund operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities, or money market securities. These funds offer investors the advantages of diversification and professional management. To participate, the investor may pay fees and expenses. (Mutual funds are not covered by FDIC insurance.)
N
National Credit Union Administration (NCUA):
The Federal regulatory agency that charters and supervises Federal credit unions. (NCUA also administers the National Credit Union Share Insurance Fund, which insures the deposits of Federal credit unions.)
O
Offset, Right of:
Banks' legal right to seize funds that a guarantor or debtor may have on deposit to cover a loan in default. It is also known as right of setoff.
Online Banking:
A service that allows an account holder to obtain account information and manage certain banking transactions through a personal computer via the financial institution's website. (This is also known as internet or electronic banking.)
Open-End Credit:
A credit agreement (typically a credit card) that allows a customer to borrow against a pre-approved credit line when purchasing goods and services. The borrower is only billed for the amount that is actually borrowed plus any interest due. (Also called a charge account or revolving credit.)
Opt-In:
Permission granted to a business or organization to use your email address for promotional or marketing purposes, or to rent your email address to another organization.
Opt-Out:
The opposite of Opt-In; not granting permission for a business or organization to use your email address for promotional or marketing purposes, or to rent your email address to another organization.
Option Period:
In Texas, an option period is the short period of time during which a seller of real estate may not to sell to anyone other than the person or entity who placed a bid. This gives the potential buyer time to perform inspections without placing his/her earnest money at risk. The potential buyer pays a non-refundable option fee in order to take advantage of an option period.
Overdraft:
When the amount of money withdrawn from a bank account is greater than the amount actually available in the account, the excess is known as an overdraft, and the account is said to be overdrawn.
Overlimit:
An open-end credit account in which the assigned dollar limit has been exceeded.
P
Participating Community:
A community for which the Federal Emergency Management Agency (FEMA) has authorized the sale of flood insurance under the National Flood Insurance Program (NFIP).
Passbook:
A book in ledger form in which are recorded all deposits, withdrawals, and earnings of a customer's savings account.
Past Due Item:
Any note or other time instrument of indebtedness that has not been paid on the due date.
Patch:
A new software release created to update a computer software program. Updates may include security, performance, or usability enhancements.
Payday Loans:
A small-dollar, short-term loan that a borrower promises to repay out of their next paycheck or deposit of funds.
Payoff:
The complete repayment of a loan, including principal, interest, and any other amounts due. Payoff occurs either over the full term of the loan or through prepayments.
Payoff Statement:
A formal statement prepared when a loan payoff is contemplated. It shows the current status of the loan account, all sums due, and the daily rate of interest.
Periodic Rate:
The interest rate described in relation to a specific amount of time. The monthly periodic rate, for example, is the cost of credit per month; the daily periodic rate is the cost of credit per day.
Periodic Statement:
The billing summary produced and mailed at specified intervals, usually monthly.
Personal Identification Number (PIN):
Generally a four-character number or word, the PIN is the secret code given to credit or debit cardholders enabling them to access their accounts. The code is either randomly assigned by the bank or selected by the customer. It is intended to prevent unauthorized use of the card while accessing a financial service terminal.
Pharming:
Pharming takes place when users type in a valid URL and you are illegally redirected to a website that is not legitimate in order to capture personal information through the internet such as credit card numbers, bank account information, Social Security number and other sensitive information.
Phishing:
The process of seeking to obtain personal information illegally through email or pop-up messages in order to deceive you into disclosing your credit card numbers, bank account information, Social Security number, passwords, or other sensitive information.
Point of Sale (POS):
1) The location at which a transaction takes place. 2) Systems that allow bank customers to effect transfers of funds from their deposit accounts and other financial transactions at retail establishments.
Pop-Up Ads:
A form of web advertising that appears as a "pop-up" on a computer screen, they are intended to increase web traffic or capture email addresses. However, sometimes popup ads are designed with malicious intent like when they appear as a request for personal information from a financial institution.
Power of Attorney:
A written instrument which authorizes one person to act as another's agent or attorney. The power of attorney may be for a definite, specific act, or it may be general in nature. The terms of the written power of attorney may specify when it will expire. If not, the power of attorney usually expires when the person granting it dies. Some institutions require that you use the bank's power of attorney forms. (The bank may refer to this as a Durable Power of Attorney: The principal grants specific rights to the agent.)
Preauthorized Electronic Fund Transfers:
An EFT authorized in advance to recur at substantially regular intervals.
Preauthorized Payment:
A system established by a written agreement under which a financial institution is authorized by the customer to debit the customer's account in order to pay bills or make loan payments.
Principal Balance:
The outstanding balance on a loan, excluding interest and fees.
Privacy Policy:
A standard policy included on most corporate websites that explains how personal information collected about visitors to a company’s site is handled.
Q
R
Real Estate Settlement Procedures Act (RESPA):
Federal law that, among other things, requires lenders to provide "good faith" estimates of settlement costs and make other disclosures regarding the mortgage loan. RESPA also limits the amount of funds held in escrow for real estate taxes and insurance.
Reconciliation:
The process of analyzing two related records and, if differences exist between them, finding the cause and bringing the two records into agreement. Example: Comparing an up-to-date check book with a monthly statement from the financial institution holding the account.
Refinancing:
A way of obtaining a better interest rate, lower monthly payments, or borrow cash on the equity in a property that has built up on a loan. A second loan is taken out to pay off the first, higher-rate loan.
Refund:
An amount paid back because of an overpayment or because of the return of an item previously sold.
Release of Lien:
To free a piece of real estate from a mortgage.
Renewal:
A form of extending an unpaid loan in which the borrower's remaining unpaid loan balance is carried over (renewed) into a new loan at the beginning of the next financing period.
Revolving Credit:
A credit agreement (typically a credit card) that allows a customer to borrow against a preapproved credit line when purchasing goods and services. The borrower is only billed for the amount that is actually borrowed plus any interest due. (Also called a charge account or open-end credit.)
S
Safe (or Safety) Deposit Box:
A type of safe usually located in groups inside a bank vault and rented to customers for their use in storing valuable items.
Satisfaction of Mortgage:
A document issued by a mortgagee (the lender) when a mortgage is paid in full.
Service Charge:
A charge assessed by a depository institution for processing transactions and maintaining accounts.
Service Pack:
A software program that updates, fixes and/or enhances a software program found on your computer, typically delivered in the form of a single, installable package.
Signature Card:
A card signed by each depositor and customer of a bank that may be used as a means of identification. The signature card represents a contract between the bank and the depositor.
Skimming:
When an unauthorized second copy of a credit or debit card is taken by an employee at a store by using a storage device that copies the details held within the card’s magnetic strip.
Spam:
Unsolicited bulk electronic “junk” messages sent to huge numbers of people via email, instant messaging, Usenet newsgroups, and more.
Spear Phishing:
A phishing attempt directed at specific individuals or companies based on the victim's personal information. The attacker could know their target's name, address, and more and use it to their advantage to gain their target's trust and gather additional information.
Spoofing:
A form of phishing, a way for cyber criminals to send emails that look legitimate, but are not, to falsely represent a legitimate company or organization. The false email from phishing will include a phony link to what closely resembles a legitimate website address. Once click upon, the victim is asked to provide personal information which is then forwarded to criminals.
Spyware:
Loaded onto your computer unbeknownst to you, spyware is a type of program that watches what users do and forwards that information to hackers over the internet.
Stop Payment:
An order not to pay a check that has been issued but not yet cashed. If requested soon enough, the check will not be debited from the payer's account. Most banks charge a fee for this service.
T
Terms:
The period of time and the interest rate arranged between creditor and debtor to repay a loan.
Trojan Horse:
A malicious program that is disguised or embedded within legitimate software program that, when activated, unwittingly allows hackers to gain unauthorized access to the computer.
Truth in Lending Act (TILA):
The Truth in Lending Act is a Federal law that requires lenders to provide standardized information so that borrowers can compare loan terms. In general, lenders must provide information on what credit will cost the borrowers, when charges will be imposed, and what the borrower's rights are as a consumer.
U
Uncollected Funds:
A portion of a deposit balance that has not yet been collected by the depository bank.
Uniform Commercial Code (UCC):
A set of statutes enacted by the various States to provide consistency among the States' commercial laws. It includes negotiable instruments, sales, stock transfers, trust and warehouse receipts, and bills of lading.
V
Variable Rate:
Any interest rate or dividend that changes on a periodic basis.
Virus:
A self-replicating computer program, loaded on to your computer without your knowledge that spreads by making copies of itself and clogging up your computer’s memory.
W
Wire Transfer:
A transfer of funds from one point to another by wire or network such the Federal Reserve Wire Network (also known as FedWire).
Worm:
Similar to a computer virus, a worm attaches itself to, and becomes part of, another executable program. Able to self-propagate, worms generally harm the network and consume bandwidth.