Banking Vocabulary

Annual Percentage Rate – the rate of interest being charged for a loan over a year’s time

ATM (automated teller machine) – a machine that accepts deposits and withdrawals, as long as there is money in the account associated with the ATM card

Balance – the total amount of money you have in your bank account

Bank – a business that keeps money for customers, makes loans and provides other money-related services

Bank Account – a safe place to keep your money, where it can earn extra money

Bank Statement – a monthly summary of the deposits and withdrawals associated with a customer’s bank account

Budget – a plan you create to control your spending and manage your personal finances

Certificate of Deposit (CD) – a type of investment that requires you to invest your money for a certain length of time and guarantees the same rate of return (interest rate) for that entire time.  CDs usually require a minimum deposit and they pay an interest rate slightly higher than a savings account.  If you withdraw money from it early, you pay a penalty.

Check – a method of payment in which money is drawn from an account

Checking Account – a bank account that account holders can write checks or use debit cards against the balance to pay merchants

Collateral – a condition of some loans.  A banker may require you to back up a loan with something of value.  If you are purchasing a house, the house itself is collateral

Compound Interest – interest that is calculated not only on the money you originally invested, but also on any interest the investment has already earned

Credit – money loaned, usually for a fee, that must be paid back

Credit Card – a plastic card used to make purchases up to the credit limit, interest on the balance will be calculated from an annual percentage rate (APR).  Credit card loans are not free money, but an unsecured loan

Credit History – a record of your borrowing and paying habits

Debit Card – a plastic card that works just like a check, only the processing time is usually faster.  Money spent is automatically taken out of the linked account, usually a checking account.  If the account does not have the funds available for the transaction, the purchase can be denied or accepted with an understanding that there will be overdraft fees

Debt – money owed to others

Deposit – adding money to your bank account

Down Payment – a deposit you make on a large purchase.  The down payment reduced the amount you need to borrow

Expense – money a person pays to buy something or pay for services

Income – money a person earns or receives

Interest – the money a bank pays depositors for using their money, or the money a person pays when borrowing money

Invest – to put your money into CDs, money market accounts, mutual funds, savings accounts, bonds or stocks to help your money grow in value and earn a profit

Money – paper and coins that are used to buy things

Need- something you must have in order to live

Price – the amount of money required to purchase something

Principal – the amount you are borrowing on a loan or the original amount of money invested

Product – toys, clothes, games, food or anything you purchase

Risk – the chance of losing your money

Saving – keeping your money for a future goal instead of using it to buy products and services

Services – people or companies who perform tasks for others.  Example – getting your haircut in exchange for money

Secured Loan – a loan that is backed up with collateral, such as a home or a car

Share – a unit of ownership in an investment or company

Spending – using your money to buy products or services

Stock – a certificate representing a share of ownership in a company

Unauthorized Purchases – those purchases made by someone other than you with your debit card, credit card or checks.  If you can prove that you did not authorize the purchase, the bank will refund your money

Unsecured Loan – a loan not backed by collateral.  Example – a credit card

Want – something you would like to have, but do not need in order to live

Withdrawal – taking money out of a bank account