Banking terms and definitions pdf: Every sector or industry have its terminology and so in banking industry too.
Many a time, these terms are difficult to understand especially if it is not your area of study and interest. There are most common banking terms which everyone understand while there are some most people don’t understand also. And that’s why we came up with this post to make everyone understand the basic banking terminology or the banking terms and definitions pdf.
Before we go into that, let’s first understand what is actually the given word “banking terms” means.
What is a Banking Terms
A banking term is a keyword or a key term used by a bank be it commercial, central bank, retail bank or even investment bank to identify or differentiate things in the banking industry. It is not just in banking, even in the health sector, in the engineering industry or ICT department etc.
We have names or terms for a something and as banking is involved in our daily lives, it is good that you as an individual to get know and understand the banking terms and definitions or we usually call it banking terms for dummies.
Banking Terms and Definitions
Right now i have up to 62 banking and definitions, but will continue to add more to it. I think you should bookmark this page incase you come up with a banking term that you don’t understand. You can check it here.
1. Dormant Account
This is very popular and common to people. In banking, when you hear dormant account it means that your account is inactive for a certain amount of time and if it continues, bank will suspend it temporaly.
2. Fixed Rate
One of the popular banking terms and definitions we know. This is interest rate that remains constant for the full term of the loan.
3. Floating Rate
This is an interest rate that is referenced to a market rate and is revised as per the change in the interest rates in the economy. When interest rates in the economy rise, floating rates rise and vice versa.
4. Atm Fees
Fees you’re charged for using an out-of-network ATM or exceeding a certain number of ATM transactions for your account, if limited.
For example, right here in Nigeria, if you make 3 consecutive atm withdrawal on a bank that you don’t have an account with, N65 will be be decuctee from your account. And that is called atm fee. Hope you understand this and whereas it is a common banking terms.
5. Certificate of Deposit(CD)
You may have came across this. A savings product used to lock in a fixed APY on deposits for a set period, until the maturity date. CDs are FDIC insured up to $250,000, and usually pay higher interest than a savings account.
6. Base Rate
It is the minimum rate a bank charges its most credit-worthy customer. The bank cannot lend below this rate (with an exception to bank employees, loans to bank depositors against their own deposits, etc)
7. Balance Transfer
Balance transfer is an option included under credit card payments and is useful for persons holding more than one card. On availing this facility, the cardholder can transfer the balance amount outstanding on card one to card two and vice versa, if he/she is not able to make full payment that is due on a particular card.
In any case, the payment due date is only delayed but the payment has to be made at the scheduled time as stated in card two. Balance transfer facility is useful in reducing the interest outgo (on card one) and extending the payment due date on the original card.
Credit is another popular banking terms and definitions. An increase in a savings or checking account, such as a deposit made to the account. 2. A person or company’s ability to borrow money, with the expectation the money will be paid back in the future.
9. Credit Card
One of the most popular forms of credit, a card that allows you to spend up to a specific limit. Interest on the balance is assessed at the end of the monthly term, so to avoid paying any interest pay off your full balance each month.
10. Credit Limit
The maximum amount you’re allowed to charge on a credit card. Once you’ve shown a habit of paying bills consistently on time, a lender may raise your credit limit – giving you more spending power.
11. Credit History
Credit history is an account of an individual’s past borrowings by way of loans, credit cards and all other debt that needs to be repaid/has been repaid. Credit history in Nigeria is provided by credit bureau. The CBN has licensed three credit bureaus in Nigeria to provide this service to banks and other bodies.
A borrower needs to provide some kind of security to the bank in case of high-ticket loans (except home loans where the property is the security). Such security is called collateral.
In case the borrower fails to repay the loan, the bank has the authority to attach the collateral to the loan and claim its dues.
13. Credit Score
contrast to a credit rating, the credit score is a number (500, 600, 700, 800 etc.) indicating an individual’s credit-worthiness. Credit bureaus look at factors such as your total debt, number of open accounts and whether you rent or own your home. A good credit score can result in a lower interest rate for loans.
decrease in a savings or checking account, such as a withdrawal or a check written against the account.
14. Debit card
An ATM card that allows you to pay for goods at stores or businesses, online, and at ATMs. A debit card draws the money from your checking account, in contrast to a credit card where you’re borrowing the money and have to pay it back later.
This is a real banking term for dummies cause it is part of our lives as we carry our debit cards(atm card) for easy cash withdrawal.
Funds added to your account be it savings account, current account, domiciliary account etc. Payment of fees is a deposit payment etc.
16. Direct deposit
An automatic deposit to your account made by your employer or an outside agency (such as a pension or government benefit payment). These are usually recurring, and spare you the hassle of depositing a paper check. Online transfers are not considered direct deposits.
17. Documentation Fee
Bank requires certain documents from the borrower to look into his creditworthiness and charges a fee for the same. These charges are known as documentation charges.
18. Electronic deposit verification (EDV)
A way to verify an account at another bank that you want to link to. Nationwide Bank will electronically send two micro deposits to your linked account. Once you report the deposit amounts back to us, you can transfer funds to and from the linked account. See also: Micro-deposits
19. Electronic Funds Transfer (EFT)
The transfer of money between accounts through ATMs or electronic payment systems. I know that most people don’t know this as it is a basic banking terminology, on how how electronic payment works.
20. EMV chip
Developed as an update to simple magnetic stripe cards. By encrypting data, this feature helps prevent data from being intercepted. EMV stands for “Europay, MasterCard and Visa,” as it was their joint effort that created the standard to ensure the security and global acceptance.
21. Equal Credit Opportunity Act
A federal law that prohibits discrimination in credit transactions on the basis of race, color, religion, national origin, sex, marital status, age, source of income or the exercise of any right under the Consumer Credit Protection Act.
22. External accounts
Accounts owned at another financial institution.
23. Good Faith
A good faith effort refers to sincere intention to deal fairly with others and act honestly. We have acceptance in good faith, that is if you recieve gift or a deal from a customer as a banker, without grudges or anger but rather wholehearted, it means accepting in good faith.
24. Home Equity Loan
A type of loan that uses the equity of your home as collateral. Typically, a home equity loan allows you to borrow a one-time lump-sum amount of money equal to or less than the equity you have in your home.
25. Insufficient funds
An account balance too low to cover a check presented for payment. Sometimes abbreviated as NSF for “non-sufficient funds.”
Another popular banking terms and definitions. The cost of borrowing money or the amount earned on a deposit account. To calculate simple interest, multiply the original amount (of your savings or your loan) by the interest rate. For compound interest, the interest is added to the total amount as it accumulates.
27. Interest income
Your earnings on savings accounts, certificates of deposit and money markets. Banks or other organizations or individuals who pay interest usually report it on Form 1099-INT.
28. Interest rate
The annual percentage paid on an interest-bearing savings account or CD, or the interest charged on loans. The interest paid on a deposit account is the “annual percentage yield” (APY) and the rate charged on a loan is the “annual percentage rate” (APR).
29. Interest transfer
A process that allows interest earned on one account to be transferred to another account. For example, the interest earned on a CD can be transferred to a money market account.
30. Joint account
A bank account held in more than one name. Each person on the account has equal ownership. The primary account holder receives the bank statements and any other correspondence.
32. MICR Code
MICR stands for Magnetic Ink Character Recognition. MICR Code comprises nine digits given at the bottom (right side) of the cheque number. It is a unique code and varies between each bank branch. MICR code is required for cheque clearance.
For loans, the date that the full balance is due. For CDs, the date the CD funds are available for withdrawal or renewal with interest paid.
34. Minimum balance
The amount your average balance in a deposit account must stay above to avoid fees.
35. Mobile banking
Thanks to Modern banking that we have this glossary of banking terms. Access to your account via your smartphone or tablet. Three channels for mobile banking are available – an app, mobile web and SMS/text messages.
36. Mobile deposit
Customers with a camera-enabled iPhone, iPad or Android device can deposit checks to their account using their bank account.
37. Mortgage loan
A loan used to purchase or refinance a home or real property, with payments usually spread over 10 to 30 years. It’s secured by real estate, such as the borrower’s primary residence.
38. No-frills account
This account is a basic savings account provided by banks to make banking simpler and more accessible for all customers. In a no-frills account, you do not have to maintain minimum balance and enjoy basic banking facilities such as electronic funds transfer, net banking, free cheque book issuance.
39. Non-sufficient funds (NSF)
An account balance too low to cover a check presented for payment.
39. Online banking
40. Online bill payment
Sending money electronically to pay your bills through a bank account. For example paytv payment(dstv, gotv), online shopping payment etc.
41. Overdraft protection
An arrangement made between you and your bank that allows you to withdraw more than the balance in your account, without incurring any penalties.
A person or business to whom a check is written to.
43. Periodic rate
The interest rate over a specific period of time. A monthly periodic rate is the cost of credit per month. A daily periodic rate is the cost of credit per day, and so forth.
44. Personal identification number (PIN)
A number issued with your debit or credit card so you can withdraw money from ATMs. To help prevent fraud, keep your PIN secret. A PIN should be memorized, never written down or disclosed to anyone else. For example your atm pin, online banking and mobile banking pin all created for security reasons.
A scam using spoofed emails from well-known companies to direct consumers to fraudulent websites. The message often sounds urgent and falsely claims there’s a problem you must “fix” by sending sensitive information to the scammers. No Bank whatsoever will ask you to divulge any detailed information via an email or text.
47. Processing fee
Bank levies processing fee in order to process the loan application of the borrower. This fee is a small percentage (example: 2.5 per cent) of the loan amount sanctioned and is usually waived off during festival time to attract more borrowers. Processing fee is charged by the bank upon sanctioning of loan to the borrower.
48. Routing number
The first nine numbers that appear at the bottom of a check or cheque to identify the financial institution. This is common in US Banks and also Canadian banks.
49. Scheduled transfer
Moving money from one account to another on a regular recurring basis, often monthly.
50. Secure Socket Layer (SSL)
A type of technology that protects your credit card and personal details when you shop or bank online.
51. Service charge
A charge for a service or a penalty for not meeting certain requirements, such as insufficient funds in a checking account.
52. Simple interest
Interest computed only on the principal balance, without compounding.
A detailed record of transactions in an account for a certain period, usually monthly or annual. A bank statement may include debits, credits, transfers, payroll deposits, fees, service charges and ATM activity. You can sign up for paperless statements when you log in to your account.
An amount charged by the owner of an ATM. This generally applies to out-of-network ATMs. Use our ATM locator to find surcharge-free ATMs in your area.
55. Total value
The current worth of an account, including funds on hold or pending approval.
The RTGS or Real Time Gross Settlement System facilitates fund transfer within same bank or inter-bank transfers, but unlike NEFT, RTGS ensures the fund transfer fast and smooth in ‘real-time’ for a nominal fee.
The minimum transfer amount is higher than NEFT.
KYC or Know Your Customer norms are imposed by the CBN on banks and other financial institutions to ensure that the correct identity of the bank customers is established and to ensure that banks deal only in legitimate banking operations and not in money laundering or frauds.
Annual percentage rate is the amount of interest you gain from keeping money in an account in a year, not including compound interest. Annual percentage yield is the amount of interest you gain from keeping money in an account in a year, including compound interest.
59. Compound interest
Interest that applies to the original deposit as well as any newly earned interest. For example, if you put N10,000 in an account that earns compound interest at five per cent a year, in the next year you will earn five per cent on N10,500. Non-compounding interest would continue to earn five per cent on N10,000.
60. Returned item fee
A bounced-cheque fee charged to the person trying to deposit the cheque. It can be charged if there are insufficient funds in the cheque writer’s account or if the account is closed.
61. Wire transfer
An electronic payment service for transferring funds by wire. Wire transfers are guaranteed funds for the recipient, meaning the payment cannot be revoked by the sender after the transfer.
62. Swift Code
A SWIFT code is an international bank code that identifies particular banks worldwide. Swift code are mostly used for international transfer especially if you want to recieve money from abroad to your Nigerian bank account.[penci_related_posts taxonomies=”undefined” title=”Similar Posts ” background=”” border=”” thumbright=”yes” number=”5″ style=”list” align=”none” displayby=”cat” orderby=”random”]
That’s all i have on banking terms and definitions pdf, which includes most common and also for dummies.