Banking Terms You May Find Useful

The following are some general terms and definitions that can be used to help you better understand your personal finances.*

ACH: (Automated Clearing House) The network of financial institutions that allow for direct deposits of paychecks, account transfers, debit-card payments between other financial institutions/businesses.

Amortization: Outlines how much interest you will pay over the life of the loan, how much of each payment is going toward interest and how much is going toward the balance. Usually depicted by monthly break down.

APR: (Annual Percentage Rate) Denotes the total interest that could be earned by the lender on a loan in a year. Most commonly used on car loans, mortgages, and other consumer loans.

APY: (Annual Percentage Yield) Denotes the total interest that could be earned if the funds remained in the account for a year. Most commonly used on savings accounts, CDs, and other interest bearing accounts. Does not require deposits to remain in account for a year to accrue interest (financial institutions may calculate earnings monthly, quarterly, etc.).

ATM: (Automated Teller Machine) Accessed with use of your financial providers debit or credit card, it permits you to make withdrawals/deposits in your bank, make a balance inquiry or withdrawal a cash advance from your line of credit. Use of ATMs outside of your financially network most commonly subject to a surcharge fee. Some financial institutions belong to a network of free-to-access ATMs.

Bounce Protection: A fee based service that occurs when consumer withdrawals money, ACH transfers, or uses their debit card which results in their account going below their current balance. More commonly known by consumers as Overdraft Protection.

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Business Banking: Developed to cater to businesses’ needs for savings, checking and loan products. Available specifically for businesses or individuals doing business under a legal name for which their business is conducted.

Certificate of Deposit (CD): Typically higher yielding deposit accounts with specific time parameters for withdrawal. Early withdrawal will most likely result in penalty.

Checking Account: Account most commonly used for daily living expenses such as groceries, clothes, entertainment, rent, etc. Generally allow unlimited withdrawals and transactions from checking to make purchases and pay bills with your debit card. Withdrawals from ATMs may be limited. Certain checking accounts earn interest.

Consumer Banking: Developed to cater to individual peoples’ needs for savings, checking and loan products.

Credit Card: Tied to your revolving credit; use accrues debt on your credit card statement. Can be used at most physical store locations or online to make purchases or pay bills. Credit card providers vary by financial institutions (i.e. Visa®, American Express®, MasterCard®, etc.).

Debit Card: Tied directly to your checking account; can be used at most physical store locations or online to make purchases or pay bills.

Equal Housing Lender: Lender abides by Fair Housing Act created by the U.S. Department of Housing and Urban Development. The act prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status, and handicap.

FDIC: (Federal Deposit Insurance Corporation) Insures select financial institutions depositor’s (customers) accounts up to at least $250,000.

IRA: (Individual Retirement Account) A deposit account specifically intended to build savings for retirement. Allows you to set aside pre-taxed money (income) to be accessed only upon retirement. Taxes to be paid when retirement savings begin to be drawn upon). Withdrawal prior to recommended age by the U.S. Government may result in penalty fee.

Money Market Account: Tied to specific balance requirements, provides generally higher APY than a typical savings account. May require minimum balances at all times.

Overdraft Protection: please see Bounce Protection

Overdraft Protection Line of Credit: A revolving loan which covers any transactions in which the consumer’s account goes below the balance up to the agreed amount. The loan is tied to a deposit account, typically a checking account.

Roth IRA: (Roth Individual Retirement Account) A deposit account specifically intended to build savings for retirement. Allows you to set aside already taxed money (income) to be accessed only upon retirement. Withdrawal prior to recommended age by the U.S. Government may result in penalty fee.

Savings Account: Generally an interest-bearing account from which you can make withdrawals and deposits, but cannot use these funds as to draw payment from with your debit card. Certain financial institutions limit withdrawal from savings.

Surcharge: Fee assessed by financial institutions when their institution’s ATM is used by an individual that is not a customer of theirs. Fee can also be assessed by the bank that the user is actually a customer.


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*Please see airbanking’s product and service listing to see specific requirements and restrictions for airbanking’s offerings.
Resources: www.hud.gov/offices/fheo/FHLaws/index.cfm , www.fdic.gov/bank/individual/failed/northcounty.html, www.bankrate.com , www.mstreetbank.com

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