Common Financial Terminology

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Common Customer Service Financial Terminology Use this glossary to explain common financial and banking-related terms customers may hear when discussing accounts, payments, loans, credit, fees, or transfers.

Common terms and definitions

• Account cycle: The period of time covered by an account statement.
• Account holder: The person named on a bank or credit account.
• Accrued interest: Interest that has built up over time but has not yet been paid.
• Affidavit: A written statement made under oath.
• Annual fee: A fee charged once a year for an account or card.
• Annual percentage rate (APR): The yearly cost of borrowing money, including interest and certain fees.
• Annual percentage yield (APY): The yearly return earned on a deposit account, including compound interest.
• Application: A form used to request a loan, credit card, or financial account.
• Arrears: Money that is overdue.
• Assets: Things a person or business owns that have value, such as cash, property, or investments.
• ATM fee: A charge for using an automated teller machine, especially one outside a bank’s network.
• Automated teller machine (ATM): A machine that allows customers to withdraw cash, deposit money, or complete basic banking transactions.
• Available balance: The amount of money currently available for use in an account.
• Balance: The amount of money in an account or the amount still owed.
• Balance transfer: Moving an unpaid balance from one credit account to another.
• Bank account: An account held at a financial institution for storing and managing money.
• Bank statement: A record of account activity over a certain period.
• Beneficiary: A person named to receive funds or benefits.
• Billing cycle: The period of time between billing statements.
• Billing statement: A document that shows charges, payments, credits, and the amount due.
• Borrower: A person or business that receives money through a loan and agrees to repay it.
• Budget: A plan for how money will be earned, spent, and saved.
• Call deposit: A deposit that can be withdrawn on demand or with very short notice.
• Card issuer: The bank or financial institution that provides a debit or credit card.
• Cardholder: The person authorized to use a debit or credit card.
• Cash advance: Money borrowed against a credit card account, usually with fees and interest.
• Cashier’s check: A check issued and guaranteed by a bank.
• Certificate of deposit (CD): A savings product that holds money for a fixed period of time and pays interest.
• Chargeback: A reversal of a card payment, usually after a dispute.
• Checking account: A bank account used for everyday deposits, withdrawals, and payments.
• Claim: A formal request for payment, reimbursement, or correction.
• Closing costs: Fees and expenses paid when finalizing a loan or real estate purchase.
• Collateral: Property or another asset pledged to secure a loan.
• Collections: The process of trying to recover money owed on overdue accounts.
• Compound interest: Interest calculated on both the original amount and previously earned interest.
• Consumer credit reporting agency: A company that collects and provides information about a person’s credit history.
• Co-signer: A person who agrees to be responsible for a loan or account if the borrower does not pay.
• Conventional (mortgage) loan: A home loan that is not backed by a government program.
• Costs; expenses; fees: Money charged for services, transactions, or obligations.
• Credit balance: A positive amount in an account or an amount owed back to the customer.
• Credit bureau: A company that collects and reports credit information.
• Credit history: A record of a person’s borrowing and repayment activity.
• Credit limit: The maximum amount that can be borrowed on a credit account.
• Credit report: A detailed report of a person’s credit history.
• Credit score: A number used to estimate how likely a person is to repay borrowed money.
• Credit union: A member-owned financial institution that provides banking services.
• Credit utilization: The amount of available credit being used.
• Creditworthy: Considered financially reliable and likely to repay borrowed money.
• Cut a check, to: To write or issue a check for payment.
• Debit: A transaction that removes money from an account.
• Debit balance: Money owed in an account or an amount subtracted from available funds.
• Debt: Money owed to a person, lender, or institution.
• Debt-to-income ratio: A comparison of monthly debt payments to monthly income.
• Default: Failure to repay a loan or meet the terms of a financial agreement.
• Delinquent account: An account with overdue payments.
• Delinquent payment: A payment that was not made by the due date.
• Deposit: Money placed into an account.
• Deposit slip: A form used to deposit money into a bank account.
• Direct deposit: Electronic payment deposited directly into a bank account.
• Disclosure: Information a financial institution must provide about terms, fees, or conditions.
• Disbursement: A payment or release of funds.
• Down payment: Money paid upfront toward a purchase, often a home or vehicle.
• Drive-through: A banking service area where customers can complete transactions without leaving their vehicle.
• Due date: The date by which a payment must be made.
• Electronic draft: A payment taken electronically from a bank account.
• Electronic funds transfer (EFT): The electronic movement of money between accounts.
• Equity: The value of property or an asset after subtracting what is still owed on it.
• Escrow account: An account where money is held for a specific purpose, such as taxes or insurance.
• Federal credit union: A credit union chartered and regulated by the federal government.
• Fee: A charge for a service or transaction.
• File a dispute: To formally report and challenge a charge, transaction, or account error.
• Finance charge: The total cost of borrowing, including interest and certain fees.
• Financial institution: A bank, credit union, or other company that provides financial services.
• Fixed interest rate: An interest rate that does not change over time.
• Foreclosure: The legal process in which a lender takes possession of a property because the borrower did not make required payments.
• Fraud: Wrongful or illegal deception for financial gain.
• Fraud alert: A notice placed on a credit report to warn lenders of possible identity theft.
• Fraudulent charges: Charges made without the account holder’s permission.
• Fund transfer: Moving money from one account to another.
• Garnishment: A legal process in which money is taken from wages or an account to pay a debt.
• Grace period: Extra time after a due date when payment may be made without penalty.
• Gross monthly income: Total income earned in a month before taxes or deductions.
• Guarantor: A person who promises to repay a debt if the borrower does not.
• Hard inquiry: A credit check that may affect a person’s credit score.
• Hold: A temporary restriction on access to funds in an account.
• Home equity line: A line of credit based on the value built up in a home.
• Home equity loan: A loan based on the borrower’s equity in a home.
• Identity theft: The unlawful use of someone’s personal information for financial gain.
• Insufficient funds: Not having enough money in an account to cover a payment or withdrawal.
• Installment loan: A loan repaid in regular scheduled payments over time.
• Interest: The cost of borrowing money or the earnings from deposited money.
• Interest rate: The percentage charged for borrowing money or paid on deposited money.
• Joint account: An account shared by two or more people.
• Late fee: A charge added when a payment is not made on time.
• Lender: A person or institution that provides money to be repaid.
• Liability: Legal or financial responsibility for a debt or obligation.
• Line of credit: A flexible borrowing arrangement up to a set limit.
• Liquid asset: An asset that can easily be converted into cash.
• Loan modification: A change to the terms of an existing loan.
• Maturity: The date when a loan, bond, or deposit becomes due or reaches the end of its term.
• Minimum payment: The smallest amount that must be paid by the due date to keep an account current.
• Money market savings account: A savings account that may pay higher interest and may have certain balance or withdrawal requirements.
• Monthly (payment) statement: A monthly record showing account activity, charges, payments, and balances.
• Mortgage loan: A loan used to buy property, usually secured by the property itself.
• NSF fee: A fee charged when there are not enough funds to cover a payment.
• Online banking: Banking services accessed through a website or app.
• Outstanding balance: The amount still owed on an account.
• Overdraft: A negative account balance caused by spending more money than is available.
• Overdraft fee: A fee charged when an account does not have enough money to cover a transaction.
• Pay-off amount: The total amount needed to fully pay a loan or account balance.
• Payment due: The amount that must be paid by the due date.
• Payment history: A record of past payments made on an account.
• Payment schedule: A plan showing when payments are due and how much must be paid.
• Penalty: A charge or consequence for breaking a financial rule or missing a payment.
• Pending transaction: A transaction that has been authorized but not yet fully processed.
• Personal identification number (PIN): A numeric code used to verify identity for card or account access.
• Post a check, to: To record or apply a check payment to an account.
• Preapproval: An initial review indicating that a person may qualify for a loan or credit product.
• Prepayment penalty: A fee for paying off a loan earlier than agreed.
• Primary card holder: The main person responsible for a credit card account.
• Prime rate: A benchmark interest rate banks often use to set loan and credit rates.
• Principal: The original amount of money borrowed or invested, not including interest.
• Promotional rate: A temporary low interest rate or special offer.
• Reconciliation: The process of matching account records with transactions to confirm accuracy.
• Refinance: To replace an existing loan with a new one, often with different terms.
• Revolving line of credit: Credit that can be borrowed, repaid, and borrowed again up to a set limit.
• Routing number: A number used to identify a financial institution in transactions.
• Savings account: A bank account used to hold money and earn interest.
• Secured card: A credit card backed by a cash deposit used as collateral.
• Secured loan: A loan backed by collateral.
• Service charge: A fee charged for maintaining an account or processing a service.
• Signature card: A document showing the authorized signatures for an account.
• Soft inquiry: A credit check that does not affect a person’s credit score.
• Statement balance: The total balance shown on the most recent billing statement.
• Stop payment: A request to a bank to prevent a check or payment from being processed.
• Term: The length of time for a loan, deposit, or agreement.
• Transfer fees: Charges for moving money from one account or institution to another.
• Trust: A legal arrangement in which one party holds or manages assets for another.
• Underwriting: The process of reviewing financial information and risk before approving a loan or policy.
• Unsecured loan: A loan that does not require collateral.
• Update, to: To change or correct account or personal information.
• Variable interest rate: An interest rate that can change over time.
• Voucher: A document that serves as proof of a transaction, payment, or authorization.
• Waive, to: To choose not to charge a fee or enforce a requirement.
• Warrantor: A person or company that provides a warranty or guarantee.
• Wire transfer: An electronic transfer of money from one bank or financial institution to another.
• Withdraw, to: To take money out of an account.
• Withdrawal: The act of taking money out of an account.
• Withhold, to: To keep back money, payment, or information until certain conditions are met.
• Yield: The return earned on an investment, usually shown as a percentage.