This dictionary of banking terminology is designed to help the beginning investor navigate the basics of banking.
A lending institution that extends credit for interest and fees.
This is a check issued by the bank that works just like cash, but requires your signature and identification for redemption.
A bank account where you can store money, accessed by writing "checks"-notes that represent the amount of money you wish to withdraw from the bank from a remote location and use to pay for a debt or service.
Credit is a resource loaned to you under assumption that you will repay the debt owed at a specified time. Most of our financial exchanges are done using one form or credit or another. Some of the obvious forms of credit are loans, credit cards and lines of credit, but even our use of water, electricity and gas depends on credit - we pay at the end of the month, after using the services provided.
There are three agencies regarded as the primary collectors of credit histories. There are also several specialty reporting agencies which handle more unique credit history information.
Your credit history is the record of how well you have paid off borrowed money, whether lent to you in the form of services under contract, loans, credit cards or lines of credit. Your credit history takes into account not only if you repay the debts you incur, but also how quickly you repay those debts.
Your credit report is the official record of your credit history. This report, which is assembled by a credit bureau, consists of information reported by lenders, credit card companies and public records. It lists such items as your name, residential addresses, employment history and Social Security number. It also tracks collection history from collection agencies, plus information about your credit accounts, such as your credit limits and amount of credit capacity used. This report also tracks how many inquiries have been made regarding your credit history, and may contain a 100-word statement if you have chosen to file one with the bureau.
Your credit score is a number assigned to your credit report as a way to measure the quality of your credit history. You can think of it like a grade on a test - the higher the score, the better.
A lending institution that extends credit just like a bank, but is linked to a community or organization.
When your employer is able to deposit your paycheck directly into your bank account instead of sending it to you in the mail.
The price you pay for borrowing money, usually given as a percentage. You can also earn interest through investing or a savings account.
A check for more than you have in your account. When this happens, you will pay a penalty.
A bank account where you can store money, and sometimes gain a very small amount of accrued interest, inaccessible by checks.
A form of credit-such as a car loan or mortgage-that is linked to collateral like a house, car or property that can be repossessed if the debt is not repaid.
When you ask a bank not to pay the money for a check after you write the check. A bank will likely charge for the service.
A form of credit-like a credit card-that is loaned based on evidence that you have sufficient income to repay a debt. Service-related credit is when you sign a contract for a service, such lawn care or electricity. Such credit is extended assuming you will pay the fee after the service has been provided.
Which banks are the safest banks? Banks always loan more money than they have in their coffers, but the safest banks know how to lend wisely so that they will not end up under water.
How do you choose the best banks for your needs when the financial world is on a roller coaster ride? If you're entering the financial world right now, you'll want to do some research before you choose a bank.
If you use a commercial bank, you may wonder what advantages there are compared to banking with other kinds of banks. As you'll see, not all banks provide the same services, especially if you are a business owner.