Available Credit: The difference between the credit limit assigned to a cardholder account and the present balance of the account.
Balance Transfer: The
process of moving an outstanding balance from one credit card to
another. This is usually done to obtain a lower interest rate on the
outstanding balance. Transfers are sometimes subjected to a Balance
Transfer Fee.
Bank Custodian: A
bank custodian is responsible for maintaining the safety of clients'
assets held at one of the custodian's premises, a sub-custodian facility
or an outside depository.
Bank Examination: Examination
of a bank's assets, income, and expenses-as well as operations by
representatives of Federal and State bank supervisory authority-to
ensure that the bank is solvent and is operating in conformity with
banking laws and sound banking principles.
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.
Banking Day: A business day during which an office of a bank is open to the public for substantially all of its banking functions.
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 Date: The
month, date, and year when a periodic or monthly statement is
generated. Calculations have been performed for appropriate finance
charges, minimum payment due, and new balance.
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.
A
billing error can also be caused by a creditor's failure to credit a
payment or other credit to an account as well as accounting and clerical
errors.
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. The face of the check bears the words "certified" or
"accepted," and is signed by an official of the bank or thrift
institution issuing the check. The signature signifies that
- the signature of the drawer is genuine, and
- sufficient funds are on deposit and earmarked for payment of the check.
Charge-off: The balance on a credit obligation that a lender no longer expects to be repaid and writes off as a bad debt.
Cheque: 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
whoever bears the check to the institution for payment.
Checking Account: A demand deposit account subject to withdrawal of funds by check.
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 agreements.
Closing a Mortgage Loan: The
consummation of a contractual real estate transaction in which all
appropriate documents are signed and the proceeds of the mortgage loan
are then disbursed by the lender.
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.
Collected Funds: Cash deposits or checks that have been presented for payment and for which payment has been received.
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.
Collection Items: Items-such
as drafts, notes, and acceptances-received for collection and credited
to a depositor's account after payment has been received. Collection
items are usually subject to special instructions and may involve
additional fees. Most banks impose a special fee, called a collection
charge, for handling collection items.
Collective Investment Funds (CIFs): A
Collective Investment Fund (CIF) is a trust created and administered by
a bank or trust company that commingles assets from multiple clients.
The Federal securities laws generally require entities that pool
securities to register those pooled vehicles (such as mutual funds) with
the SEC. However, Congress created exemptions from these registration
requirements for CIFs so long as the entity offering these funds is a
bank or other authorized entity and so long as participation in the fund
is restricted to only those customers covered by the exemption. If
these limitations are met, CIFs are exempt from SEC registration and
reporting requirements.
Co-Maker: A
person who signs a note to guarantee a loan made to another person and
is jointly liable with the maker for repayment of the loan. (Also known
as a Co-signer.)
Consumer Credit Counseling Service: A
service which specializes in working with consumers who are
overextended with debts and need to make arrangements with creditors.
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 Card Account Agreement: A written agreement that explains the
- terms and conditions of the account,
- credit usage and payment by the cardholder, and
- duties and responsibilities of the card issuer.
Credit Card Issuer: Any financial institution that issues bank cards to those who apply for them.
Credit Disability Insurance: A
type of insurance, also known as accident and health insurance, that
makes payments on the loan if you become ill or injured and cannot work.
Credit Life Insurance: A type of life insurance that helps repay a loan if you should die before the loan is fully repaid. This is optional coverage.
Credit Limit: The maximum amount of credit that is available on a credit card or other line of credit account.
Credit Repair Organization: A
person or organization that sells, provides, performs, or assists in
improving a consumer's credit record, credit history or credit rating
(or says that that they will do so) in exchange for a fee or other
payment. It also includes a person or organization that provides advice
or assistance about how to improve a consumer's credit record, credit
history or credit rating. There are some important exceptions to this
definition, including many non-profit organizations and the creditor
that is owed the debt.
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 800, 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.
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-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.
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.
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.
Drawee: The person (or bank) who is expected to pay a check or draft when it is presented for payment.
Drawee bank: The bank upon which a check is drawn.
Drawer: The person who writes a check or draft instructing the drawee to pay someone else.
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.
Guaranteed Student Loan: An
extension of credit from a financial institution that is guaranteed by a
Federal or State government entity to assist with tuition and other
educational expenses. The government entity is responsible for paying
the interest on the loan and paying the lender to manage it. The
government entity also is responsible for the loan if the student
defaults.
Guarantor: A party who agrees to be responsible for the payment of another party's debts should that party default.
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.
Lease: A
contract transferring the use of property or occupancy of land, space,
structures, or equipment in consideration of a payment (e.g., rent).
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.
Loan-to-Value Ratio (LTV): The
ratio of the loan principal (amount borrowed) to the appraised value
(selling price). For example, on a $100,000 home, with a mortgage loan
principal of $80,000, the loan-to-value ratio is 80 percent. The LTV
will affect programs available to the borrower; generally, the lower the
LTV, the more favorable the program terms offered by lenders.
Loan Contract: The written agreement between a borrower and a lender in which the terms and conditions of the loan are set.
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 Loan: A loan made by a lender to a borrower for the financing of real property.
Mortgagee: The lender in a mortgage loan relationship.
Mortgagor: The borrower in a mortgage loan relationship. (Property is used as collateral to make payment.)
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.)
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.
Overdraw: To write a check for an amount that exceeds the amount on deposit in the account.
Overlimit: An open-end credit account in which the assigned dollar limit has been exceeded.
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.
Payday Loans: A small-dollar, short-term loan that a borrower promises to repay out of their next paycheck or deposit of funds.
Payee: The person or organization to whom a check, draft, or note is made payable.
Paying (Payor) Bank : A bank upon which a check is drawn and that pays a check or other draft.
Payment Due Date: The
date on which a loan or installment payment is due. It is set by a
financial institution. Any payment received after this date is
considered late; fees and penalties can be assessed.
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.
Payor: The person or organization who pays.
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.
PITI: Common acronym for principal, interest, taxes, and insurance—used when describing the monthly charges on a mortgage.
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.
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.)
Reverse Mortgage: A
reverse mortgage is a special home loan product that allows a homeowner
aged 62 or older the ability to access the equity that has accumulated
in their home. The home itself will be the source of repayment. The loan
is underwritten based on the value of the collateral (home) and the
life expectancy of the borrower. The loan must be repaid when you die,
sell your home, or no longer live there as your principal residence.
Time Deposit: A
time deposit (also known as a term deposit) is a money deposit at a
bank that cannot be withdrawn for a certain "term" or period of time.
When the term is over it can be withdrawn, or it can be held for another
term. The longer the term, the better the yield on the money.
Generally, there are significant penalties for early withdrawal.
Trust Account: A general term that covers all types of accounts in a trust department, such as estates, guardianships, and agencies.
