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Glossary of Common Banking Terms

Annual Percentage Rate (APR): the percentage of interest you will pay on the unpaid balance of a credit card or loan over the course of one year

Annual Percentage Yield (APY): the percentage of interest earned on a savings account

Automated Teller Machine (ATM): a machine at which you can withdraw cash, make deposits, get balances, and transfer money between accounts

Balance: (1) the amount of money remaining in a bank account; (2) the unpaid portion of a bill

Cashier's or Certified check: a personal check that your bank guarantees it will honor

Checking account: a bank account from which money may be withdrawn by writing a check

Collateral: property pledged to a lender by a borrower as a backup source of loan repayment

Credit card: a card that may be used instead of cash for some purchases, of which at least a portion must be paid each month with interest accumulating on any unpaid balance

Credit rating: a rating compiled from the data in one's credit report which is used by banks and other businesses to determine the level of credit risk a person represents.  

Credit report: a report that provides information on where you work and live and how you pay your bills

Debit Card: a card that may be used instead of cash for some purchases. The funds are deducted from the available balance in your checking account. 

Debt: the amount of money you owe to other people or businesses

Deposit: to put money into a bank account

Finance charge: money you pay in the form of interest on the unpaid balance of a bill

Gross pay: the amount of money you are paid before any deductions are taken

Income: the total amount of money you earn from employment and other sources

Interest: the percentage you earn from your deposits in a bank account or the percentage you pay on a loan

Loan: money that you borrow and then pay back in installments over a set period of time

Minimum balance: the least amount of money that you can have in a bank account

Money order: a check that may be purchased with cash at a bank or post office

Paycheck: a check by which you are paid a wage for regular employment

Pay stub: a detachable portion of a paycheck, which you keep for your records after depositing the paycheck in the bank

Payment guarantee: an assurance that you have enough funds available to cover the amount of a check

Personal check: a check for personal use that has your name and address on it

Principal: an amount of borrowed money, not including interest

Salary deductions: money taken out of your wages for federal, state, and local taxes, as well as for Social Security and other benefits (such as, health insurance and pension funds)

Savings account: a bank account that pays interest on the money deposited in it

Take-home pay: the amount of money remaining in your paycheck after deductions (taxes, Social Security) have been taken (also called net pay)

Term: the period of time within which a loan must be repaid

Transfer: to withdraw money from one account and deposit it in another

Withdraw: to take money out of a bank account