Glossary

APR - The annual percentage rate of interest, usually on a loan or mortgage, representing the true cost of the loan or mortgage as it shows any additional payments beyond the interest rate.

ATM (Automated Teller Machine) – Machine that accepts deposits and withdrawals (as long as there is money in the account associated with the card)

Bank Statements - This is a statement from the bank giving details of transactions in the relevant account. It can be requested at any intervals required, usually monthly.

Balance – the total money you have in your bank account

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) for the entire time. CDs usually require a minimum deposit and they pay an interest rate slightly higher than a savings account. However, if the money is withdrawn early, you will have to pay a penalty.

Collateral – an asset pledged for the repayment of a loan

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

Debit Card – a plastic card that allows money spent to be automatically taken out of the associated account. If the account does not have adequate funds for the transaction, the purchase can be denied or accepted with an understanding that there will be overdraft fees.

Deposit – adding money to your bank account

Down payment – a deposit you make on a large purchase. The down payment reduces 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 – money a bank pays depositors for using its money, or the money a person pays when borrowing money

Overdraft - This is when a person has a minus figure in his account. It can be authorized (agreed to in advance or retrospect) or unauthorized (where the bank has not agreed to the overdraft either because the account holder represents too great a risk to lend to in this way or because the account holder has not asked for an overdraft facility).

Payee - The person who receives a payment. This often applies to cheques. If you receive a cheque you are the payee and the person or company who wrote the cheque is the payer.

Payer - The person who makes a payment. This often applies to cheques. If you write a cheque you are the payer and the recipient of the cheque is the payee.

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

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

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

Unauthorized purchases – those purchases made by someone other than you, but with your debit or credit, or stolen cheques. If you can prove that you did not approve the purchases, the bank will refund your money.

Unsecured loan – a loan not backed by collateral.

Withdrawal - Taking money out of a bank account