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| Account Glossary |
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This section is designed to help you understand basic banking terms. If you are interested in receiving additional information on any of our products or services, please call 888-703-5414 or email info@bankplace.com.
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- Annual Percentage Rate (APR)
- The Annual Percentage Rate is a yearly rate of interest paid on a loan expressed as a percentage and is required to be disclosed by the financial institution
- Automated Teller Machine (ATM)
- A machine that allows the customer to perform some of the more common teller transactions, such as cash withdrawals, deposits and transfers. ATMs are generally accessible 24 hours a day, 7 days a week, 365 days a year.
- Available Balance
- That portion of your account balance that is available for withdrawal.
- Cashier's Check
- A check drawn by a bank on itself, signed by a cashier or other authorized bank officer and payable to a third party named by the customer. Cashier's checks are universally accepted.
- Certificate of Deposit (CD)
- A type of deposit account typically with a generally fixed minimum term and initial deposit. Interest payments may be either fixed or variable. CDs offer a higher interest rate than other deposit accounts. There are usually penalties for early withdrawal of funds.
- Check/Debit Cards
- A plastic card with a bank logo, designed to give a customer access to funds in his/her checking account to obtain cash, purchase goods and services, or transfer funds from one account to another and are usually accepted around the world.
- Compound Interest
- Interest that accrues when earnings for a specific period are added to the principal; thus interest for the following period is computed on the principal plus accumulated interest.
- Current Balance
- Your current balance is the amount you now hold in your account.
- Daily Compounding
- A frequency of calculating interest whereby interest is added to the principal each day and then earns interest itself.
- Direct Deposit
- A preauthorized system in which customers' goverment benefits or other payments are automatically deposited to their checking or savings accounts. Some types of Direct Deposit are social security, VA benefits, annuities and payroll.
- Education IRA
- An investment tool created for the purpose of paying for the future cost of a child's post-secondary education. Contributions and their earnings are tax free when withdrawn to pay for qualifying education expenses.
- Electronic Federal Tax Payment System (EFTPS)
- EFTPS is a way for taxpayers to pay federal taxes electronically from the convenience of their office or home.
- FDIC Insurance
- The Federal Deposit Insurance Corporation was created by Congress in 1933 to make the savings of millions of Americans secure. The FDIC protects depositors' funds in the event of the financial failure of their bank or savings institution. For more information about FDIC insurance go to www2.fdic.gov/edie.
- Grace Period
- A time period within which a depositor can withdraw funds from a certificate without penalty.
- Individual Retirement Accounts (IRAs)
- Three types to choose from for eligible individuals, the Traditional IRA, Rollover IRA and the Roth IRA.
- Inflation
- Inflation is the increase in the cost of living, expressed as a percentage increase over the previous year's prices. It can be the single largest risk to your retirement plan since even very small changes in the inflation rate can make a significant difference in the amount of money you will need to pay for your living expenses during retirment.
- Money Market Deposit Account
- A deposit account offered by financial institutions that is designed to be directly equivalent to, and competitive with, money market mutual funds. These accounts, unlike mutual funds, are FDIC insured. Money Market Accounts are subject to withdrawal limitations.
- NOW Account
- Negotiable Order of Withdrawal (“NOW”) accounts are interest earning time deposit accounts with which the customer is permitted to write drafts (or checks) against money held on deposit. There are eligibility requirements for who may qualify to own a NOW Account.
- Overdraft Protection
- A service that allows the customer to write checks for an amount over and above the amount in their checking account. Funds are transferred from their line of credit or other designated account to their checking account as needed.
- Personal Identification Number (PIN) or Personal Access Number (PAN)
- A secret number or code used by the account holder to authorize a transaction or obtain information regarding his or her account. Often used in conjunction with a plastic card or with a telephone voice response system.
- Principal
- When you make a deposit, the amount of money you originally invest is referred to as principal. The interest you earn on your savings is based on the amount of principal in your account.
- Qualified Retirement Plan
- An employee benefit plan that qualifies for special tax treatment under the Internal Revenue Code Section 401(a).
- Regular Savings Account
- A form of deposit account with no legal limits or requirements as to the amount, duration, or times of additions. Limitations do apply to certain types of withdrawals.
- Rollover IRA
- A type of IRA that allows employees who receive a lump-sum distribution upon leaving an employer, or upon termination of an employer's qualified retirement plan, to deposit all or any portion of the funds in an IRA. The portion of eligible distribution that is put into such an account enjoys the same tax-deferral status as a regular IRA.
- Roth IRA
- A type of IRA in which contributions are not deductible but distributions can generally be withdrawn tax free.
- Signature Card
- A form, executed by an account holder, establishing account ownership and setting forth some of the basic terms of the account and provisions of the deposit contract.
- SIMPLE IRA
- Savings Incentive Match Plan for Employees of small employers. This Retirement Plan is simple to administer and offers contribution options that are both flexible and substantial; generally available to both for-profit and not-for-profit employers having no more than 100 employees.
- Simplified Employee Pension Plan
- A plan by an employer to make contributions toward an employee's retirement income. The employer makes contributions, up to the annual contribution limits, directly to an IRA set up by an employee with a qualified financial institution.
- Tax-Deferred
- The interest or other earnings you receive from an investment which are not taxed until you withdraw or take possession of them. Investments in annuities or retirement accounts may be tax-deferred so you don't pay the tax until you withdraw. Other investments, such as municipal bonds, may be tax-exempt and you never pay tax on your earnings.
- Tax Identification Number (TIN)
- The number used to identify an individual or entity for federal income tax purposes.
- Tiered Interest Rate
- An interest rate structure in which the entire account balance earns a higher rate once it reaches the designated level.
- Traditional IRA
- Contributions made to a Traditional IRA may be partially or fully deductible, yet distributions are generally taxable.
- Trustee Transfer
- The moving of IRA funds from one IRA trustee directly to another IRA trustee, with no check being made payable to the IRA participant. This type of transfer is not subject to any time or frequency restrictions.
- Uncollected Funds
- Funds that have been deposited in an account or cashed against an account by a check that has not yet been cleared through the check collection process and paid by the drawee bank. Financial institutions typically place a temporary hold on their customers' uncollected funds, making those funds unavailable for withdrawal until the time period of the hold expires.
- Uniform Transfer to Minors Act
- An act that sets forth provisions for giving a minor an intangible gift (e.g., bank accounts, stocks or bonds) that results in income shifting with an adult serving as custodian. The custodian has direct control over the gift and can sell and reinvest proceeds from the gift for the minor with the minor recognizing any gain and/or annual income that results.
- Wire Transfer
- An electronic transfer of funds from one financial institution to another.
Loan Glossary
- Adjustable Rate
- An interest rate that may change periodically in relation to an index and can cause payments to increase or decrease accordingly.
- Amortization
- The gradual reduction of a debt by periodic payments large enough to meet current interest payments and to repay the principal at maturity. The loan is repaid through regular scheduled payments of principal and interest paid for a pre-determined amount of time.
- Amortization Tables
- The amortization table illustrates the amount of each regular payment applied to unpaid principal and interest due during the loan term and assumes all payments are made in accordance with the loan contract.
- Annual Percentage Rate (APR)
- The cost of credit on a yearly basis, expressed as a percentage. The APR is required to be disclosed by the lender under the federal Truth in Lending Act, Regulation Z, and includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. The APR does not include title insurance, appraisal and credit report fees.
- Appraisal
- An opinion of the market value of an asset as of a specific date.
- Discount Points
- One discount point is equal to 1% of your loan amount. For example, on a $100,000.00 mortgage loan, 1.5 discount points equals $1,500.00. Discount points are paid to obtain a lower interest rate on your mortgage. The more points you pay, the lower the rate you may obtain. The longer you own your property and continue to pay on the loan, the more likely it will be that paying points will be advantageous for you. If you intend to hold the mortgage for only a short period of time, the cost you pay upfront may exceed the benefit you will receive from obtaining a lower rate.
- Equity
- The equity in your home is the difference between the remaining balance owed on your mortgage loan and the appraised value of the home. Your equity increases if your home increases in value as you make your monthly payments of principal and interest. The principal portion of your payment is used to repay the amount you borrowed.
- Escrow
- A process within a transaction in which a neutral third party holds funds or property until the procedures are completed.
- Home Equity Line of Credit
- A loan providing you with the ability to borrow funds at the time and in the amount you choose, up to a maximum credit limit for which you have qualified. Repayment is secured by the equity in your home.
- Home Equity Loan
- A fixed or adjustable rate loan obtained for a variety of purposes and secured by the equity in your home. Interest paid is usually tax-deductible.
- Interest-Only Payments
- Interest-only payments pay only the interest you owe. They are not large enough to pay back any of the initial amount you borrowed.
- LIBOR
- LIBOR stands for the London Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale (or "interbank") money market.
- Lien
- A claim against a vehicle by another party which utilizes the vehicle as security for repayment of a loan or other claim that usually affects the ability to transfer ownership.
- Loan-To-Value (LTV)
- This percentage is computed as follows: Loan Amount/Appraised Value of the Home. As an example, a loan of $80,000.00 on a home valued at $100,00.00 has an "LTV" ratio of 80%. In the case of a home equity line of credit, the LTV encompasses the total loans, including the line of credit, as a percentage of the value of your home.
- Lock or Lock In
- A commitment you obtain from a lender assuring you a particular interest rate or feature for a definite time period. This commitment provides protection - should interest rates rise between the time you apply for a loan, acquire loan approval and subsequently, close the loan - to receive the funds you have borrowed.
- Mortgage Insurance
- Mortgage insurance protects the lender from loss should you cease making payments. Very often, you will not be required to pay mortgage insurance if your down payment is more than 20% of the appraised value of your home. Check with your lender to see how your mortgage insurance can be waived.
- Origination Fee
- This fee is usually 1% of the loan amount and pays the lender for processing and originating your loan. As an example, the origination fee on a $100,000.00 mortgage loan is $1,000.00.
- Other Closing Costs
- Costs included in this calculation are the appraisal fees, underwriting or other lender fees, title insurance and escrow fees.
- Preparation Charges
- Charges imposed by a dealer for preparing a newly purchased car for delivery to the buyer which could include filling the gas tank, verifying appropriate fluid levels and any last minute touch-up and cleaning.
- Rate Index
- The interest rate index used to calculate interest charges on a loan. One example is the Prime Rate, which is the rate the largest U.S. institutions charge their best customers. For instance, if the rate on your line of credit is "Prime + 2", your annual interest rate is 7% if the Prime Rate is 5%. Other rate indexes commonly used are LIBOR and Treasury rates. .
- Residual Value
- The amount agreed upon to represent the value of a vehicle at the termination of the lease, usually determined by the amount of depreciation in the vehicles' value predicted during the term of the lease.
- Term
- The length of time that you will make payments on your loan.
- Underwriting
- The process of verifying data and approving a loan.
- Upfront Costs
- Upfront costs are any fees and charges collected at the time of the loan, as opposed to over the life of the loan.
- Variable Rate
- Percentage a borrower pays for the use of money, usually expressed as an annual percentage, and which fluctuates in tandem with a rate index.
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