Glossary
 

Glossary of Terms

A - B - C - D - F - I - L - M - N - O - P - R - S

A

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

Annual Percentage Rate (APR)
The annual rate that is charged for borrowing, expressed as a single percentage number that represents the actual yearly cost of funds over the terms of a loan. This includes any fees or additional costs associated with the transaction.

Annual Percentage Yield (APY)
The effective annual interest rate that reflects the actual interest earned on a yearly basis expressed as a percentage taking into account the effect of compounding interest, usually for deposit or investment products (such as certificates of deposit).

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.

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B

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 insufficient funds to cover it in your account.

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C

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.

Check Card
See debit card.

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

Clear
“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.

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

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D

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 that earns no interest.

DIF
Depositors Insurance Fund; a private, industry-sponsored insurance fund that insures all deposits above Federal Deposit Insurance Corporation (FDIC) limits at Massachusetts-chartered savings banks.

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

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F

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.

Floor Rate
The lowest and adjustable rate mortgage can ever be during the life of the loan.

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I

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.

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L

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).

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M

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

Mortgage
A long-term loan secured by collateral of real estate that legally transfers ownership from the debtor to the creditor until the debt is paid.

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N

Non-Sufficient Funds (NSF)
See Insufficient Funds.

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O

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.”

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P

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.

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R

Refinance
To replace an existing debt with another. The new debt may be an increase or decrease in the amount or the term and/or change of interest rate. The most common being a refinance of a home mortgage.

Routing Number
A routing transit number (RTN), routing number, Institution Transit Number, or ABA number is a nine digit bank code, used in the United States, which appears on the bottom of negotiable instruments such as checks identifying the financial institution on which it was drawn. Southbridge Savings Bank’s routing number is 211371735.

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S

Service Charge
A monthly fee or other fee a bank charges for handling an account, typically on a checking account.

Stop Payment
A request made to a bank to not pay a specific check; often used when a check has been lost or stolen.

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