Money Terms

Just some quick definitions to help you better understand banking and finances!
 

Account: The money put into a bank.  Each customer has his or her own account, and many customers have several different kinds of accounts.

A Savings Account is money put away for safekeeping.
 A Charge or Credit Account is the amount of money the customer is allowed to spend with the understanding that they will pay the money back within a pre-determined future period.
 A Checking Account allows the customer to write checks instead of using cash.

Asset:  Anything you own that has some at least some basic cash value.  This can include possessions, property, bank accounts, and, of course, cash.

ATM:  This stands for Automated Teller Machine.  This is a device provided by most banks and many businesses that allows them to perform various banking activities electronically.

ATM Card:  A bank-issued card that allows customers to use a bank's ATMs.

Balance:  Basically, the amount of money in an account or, alternately, how much money is owed on a loan.  A Principal Balance is the amount of money in an account before interest is added.

Check: Small, formalized notes that authorizes a bank to pay a specified amount out of the customer's checking account.  Check forms are usually issued by the bank.

Collateral:  An asset pledged as security in a loan.

Compounding Interest: Interest added to interest previously earned on a principal balance.  The more frequently interest is compounded, the higher the amount the account has "earned" for that period. 

Credit:  An amount of money that banks, merchants, and others may make available to you in trust that you will pay them back at a future date.

Credit Card:  A small, plastic card that authorizes its user for a pre-determined credit limit.  Can be used for purchases and other money transfers.

Debit Card:  Instead of supplying credit which must be later paid, a debit card subtracts money automatically from a pre-existing account.

Deposit: Placing money into an account.

Direct Deposit:  Money that is electronically placed into an account.

Equity:  The value of a property beyond the amount owed on it.

Fee:  The amount of money a bank charges for providing a certain service.  For example, a bank may charge a small fee each time a customer use an ATM machine.
 
Interest:  The amount of money an account accumulates over time.  The exact amount depends on the size of the account, the interest rate, and how often the interest is compounded.  You can think of it as the amount of money in the account "earns" for being in the bank for a certain amount of time.

Interest Rate:  The percentage of the account that is compounded.  For example, if an account had a $10 balance, a 10% rate would mean $1 would be added to the account. There are IRA to help pay for education.

IRA:  This stands for Independent Retirement Account.  This is a specialized, long-range savings account people use to put money away for their retirement years. Some IRA's may help pay for education.

Loan:  An amount of money a bank will allow you to borrow from them, with the understanding that you will pay them back in the future on pre-arranged terms with a certain amount of interest.

Mortgage: A special type of loan dedicated to the purchase of a house or other real-estate property.

Trust Fund:  Money and assets that are held for you in another's care for a specified period of time.

Withdrawal: Removing money from an account.