Glossary

Certificates of Deposit (CD) – A savings product that normally offers higher interest rates than your typical savings account. Terms range from 91 days to 10 years, with the interest rate tied to the term and amount. A penalty usually applies for early withdrawal.

IRA – Individual retirement accounts help individuals and the self-employed save for retirement. IRAs provide tax advantages for retirement savings. An IRA can be funded by cash or cash equivalents. Contribution limits and eligibility requirements for IRAs are set by federal law.

Roth IRA – A retirement plan you contribute to and from which you can make tax-free withdrawals if you meet certain requirements.

Annual Contribution Limit – Maximum amount allowed to be deposited into certain account types.

Annual Percentage Yield (APY) – A real rate of return on an investment while taking into account the effect of compounding interest.

Compound Interest – The interest you earn on your interest.

Fixed Rate CD – An investment that has a set interest rate over its entire term.

Business Checking – A transaction account specifically used to conduct transactions for a business. These accounts can be accessed by using check, debit/check cards, ATM, and electronic debits, among other methods. A business checking account also offers other services such as night deposit, merchant services and cash management services.

Business Savings – An account that allows you to deposit money from your business and earn interest. These accounts can be accessed by ATMs and electronic debits, among other methods.

Checking Account – Or transaction account as they are also known, allow unlimited deposits and withdrawals. These accounts can be accessed by using checks, debit/check cards, automated teller machines (ATMs), and electronic debits, among other methods.

Health Savings Account (HSA) – This allows you to set aside money for medical expenses with tax benefits. Eligibility for this account depends on your insurance plan and is usually established by your employer.

Joint Account – An account with more than one owner.

Savings Account – An account that allows you to deposit your money and earn interest. These accounts can be accessed by ATMs and electronic debits, among other methods. However, there may be a limit as to how many times per month money is withdrawn.

Youth Account – An account for those under 18.

ATM Debit Card – A card that allows the cardholder to withdraw cash through an ATM or for point-of-sale transactions. The cost of the transaction is debited from the cardholder’s bank account.

Bill Pay – A financial service that allows customers to pay recurring bills from their computer or mobile device. Generally, customers create a list of payees, companies, or persons they regularly pay and then instruct their bank to make the payments. Payments are sent through ACH (Automatic Clearing House), or if necessary, checks are printed and mailed to the payees.

Cash-Management Services (Business Accounts) – Cash management services help businesses collect incoming payments quickly, manage and reconcile outgoing payments efficiently, keep surplus funds invested, and obtain timely and complete information on their bank accounts.

Direct Deposit – An electronic banking service that allows depositors to have periodic payments—such as paychecks—automatically credited to a specified deposit account.

Earnings Credit (Business Accounts) – A credit earned based on balances used to offset any service charge that may be assessed.

Interest Bearing – An account that pays you interest (money) for your balance.

Mobile Deposit Capture – The ability to use your phone to deposit a check into your account.

Non-Interest Bearing – An account that does not pay you interest (money) for your balance.

Online Transfer – Moving money from one account to another using online banking.

Remote Deposit Capture – A service used by businesses that allows them to scan checks. The business receives and sends the images to the bank to be deposited directly to the business checking account.

Sweep Options – An automatic, pre-authorized transfer that moves funds from one account to another based on pre-established parameters or guidelines.

ATM Network(s) – A group of ATMs (Automated Teller Machines) that are connected for the customer’s benefit to access their bank accounts as needed.

ATM Surcharge – A fee assessed for the convenience of using an ATM.

Automatic Clearing House (ACH) – Paperless electronic debit and credit transactions, such as direct deposit of payroll.

Cashier’s Check – A check drawn from the bank’s own funds, not yours, and signed by a teller. The bank is responsible for paying the check to the payee. You pay the bank the funds needed to cover the check from your account.

Electronic Funds Transfer (EFT) – All electronic transactions like wire transfers, debit card transactions, ATM withdrawals, ACH payments, and online transfers.

Endorsement – A signature (other than the signature of the maker, drawer or acceptor) typically on the back of the instrument, such as a check, for negotiating the instrument, restricting payment, or transferring liability of the instrument to another party.

FDIC Insured (Deposit Insurance) – The FDIC (Federal Deposit Insurance Corporation) promotes the safety and soundness of insured depository institutions by identifying, monitoring, and addressing risks to the Deposit Insurance Fund, which insures deposits. The maximum deposit insurance amount is $250,000 per depositor.

Hold – A restriction on the payment of all or any part of the balance in an account.

Identity Theft – A crime involving the possession of identifying information not lawfully issued for the processor’s use, or the attempt to access the financial resources of another person or business using illegally obtained identifying information.

Liquidity – The quality of an asset that makes it readily convertible to cash.

Minimum Balance – The account balance to keep an account open and/or avoid a service charge.

Money Order – A printed order for payment of a specified sum, issued by a bank or post office. 

Monthly Maintenance Fee – Fees incurred when account requirements are not met.

Nonsufficient Funds (NSF) – An expression indicating that a check or item drawn against an account exceeds the amount of funds available in the account.

Notary – A notary verifies your identification and watches you sign and date a document. That document is then marked with a stamp, or “seal”, and is signed by the notary. The notary’s signature and stamp verifies that your signature matches your photo ID and that you willingly signed the document.

Overdraft Fee – A charge incurred when a negative (minus) balance occurs in a customer’s account. This results when you withdraw more money than you have in your account.

Preauthorized Debit – A way to set up recurring, automatic payments in advance.

Personal Financial Statement (PFS) – A document or spreadsheet that outlines an individual’s financial position at a given point in time. The statement typically includes general information along with a breakdown of total assets and liabilities. See sample here.

Wire Transfer – An electronic transfer of funds from the account of one financial institution to the account of another financial institution for the benefit of a third party. This service is often used to move large amounts of money quickly both domestically and internationally.

Business Lending – A loan intended to be used for business purposes.

Personal Lending – A loan extended to consumers, primarily for the purpose of buying goods and services for personal use.

Home Equity Line of Credit (HELOC) – A line of credit secured by your home that gives you a revolving credit line. There is a credit limit and a specified borrowing period.

Home Equity Loan – Allows homeowners to borrow money by leveraging the equity in their home.

Line of Credit – An amount of credit extended to a borrower by a financial institution that established a preset borrowing limit that can be drawn on repeatedly.

Term Loan – A loan for a specific amount that has a specified repayment schedule and a fixed or floating interest rate.

Business Line of Credit – An operating line of credit for businesses to access for recurring financing needs throughout the year. Financial institutions often require that the credit line be fully paid for a period during the business’s annual operating cycle. Rates typically are variable and based on an index selected by the bank, such as the prime rate.

Business Term Loan – A loan to a business to purchase long-term assets such as financing the purchase of equipment or real estate. Also known as a commercial loan.

Letter of Credit – An instrument issued by a bank that substitutes the bank’s credit for the credit of the buyer of goods. The bank customer can pay for the goods or services quickly and then the seller can ship those items to the buyer.

Real Estate Loan – Type of financing that’s used to buy property for businesses.

Small Business Administration (SBA) Loan – A government guaranteed small-business loan can help cover startup costs, working capital needs, real estate purchases, and more. This type of loan is issued through a private lender, like a bank, and repayment of the loan is partially guaranteed by the federal government.

WHEDA Small Business Financing – Guarantees help to reduce the financial risk to small business lenders and ensure that qualified Wisconsin small businesses have access to funding.

Amortization – The periodic reduction of the principal amount due on a mortgage or other term loan. When the full amount is repaid, the loan is fully amortized.

Annual Percentage Rate (APR) – The cost of credit on a yearly basis.

Closing Costs – Processing fees you pay to your lender that are associated with closing a loan.

Collateral – Something pledged as security for repayment of a loan, to be forfeited in the event of a default. These are assets owned by the borrower such as a home, car or cash.

Credit Approval – A process borrowers must complete in order to qualify for a loan. Through this process, a lender will assess the ability and willingness of a borrower to fully repay a loan on time.

Credit Card – A transactional instrument, most commonly a card used by the holder to obtain money, goods, or services, usually using an open-end line of credit established by the card issuer.

Credit Profile – An electronic record of your credit activities.

Credit Risk – The risk that the borrower cannot or will not repay a loan with interest as scheduled.

Debt-to-Income Ratio (DTI) – This is all of your monthly debt payments divided by your gross monthly income.

Down Payment – The amount of money a consumer or business puts towards a purchase.

Interest Rates

• Fixed Interest Rate – The interest rate doesn’t fluctuate during the fixed period of the loan.
• Variable Interest Rate – The rate will fluctuate over time based on a reference rate.

Loan Term – A set period of time to repay your loan.

Loan-to-Value Ratio – Calculated by dividing the amount borrowed by the appraised value of the property.

Personal Financial Statement (PFS) – A document or spreadsheet that outlines an individual’s financial position at a given point in time. The statement typically includes general information along with a breakdown of total assets and liabilities.

PITI Ratio (Principal, Interest, Taxes & Insurance) – Found by dividing your total principal, interest, taxes, and insurance by your total monthly income.

​​Prepayment Penalty – A fee that is incurred if the loan is paid off early.

Secured Loan – A loan for which the customer has pledged some form of collateral to protect the lender in case of default.

Unsecured Loan – A loan that is not protected by collateral.

Contactless Payments – This technology allows customers to wave the card in front of the device, eliminating the need to hand over the card, sign a receipt, or input a personal identification number. These cards also have a standard magnetic strip so they can be used in traditional contact (swipe) machines.

EMV Chip Card – The small, square computer chip cards that appear on debit and credit cards to help safeguard them against fraud.

Merchant Card Processing – Banks make it possible for merchants to accept customer payments by credit or debit card or electronic check. Financial institutions that offer merchant card services supply businesses with the equipment to process transactions, including card terminals with receipt printers. The business has an account with the merchant bank card processor, which provides settlement services for a fee, usually a percentage of each customer transaction. Merchant card services provide immediate approval of transactions, reduce the risk of returned payments, and make funds available quickly.

Point-of-Sale (POS) – A device used to transfer funds from a bank account to a retailer to pay for purchases.

Adjustable-Rate Mortgage (ARM) – Also known as a variable rate loan, this is a home loan with an interest rate that adjusts over time based on a defined market indicator.

Construction Loan – Typically a shorter-term, usually 12 months or less, higher-interest loan that provides funds required to build a residential or business property.

Down Payment Assistance – Comes in the form of grants, loans, and other programs and is typically for first-time home buyers only.

Government-Issued Mortgage – Also referred to as government-backed mortgages. These types of mortgages are backed by the government and in some cases, can make it easier to qualify for a mortgage. Examples include Federal Housing Administration (FHA) and Department of Veteran Affairs (VA).

First-Time Home Buyer Program – Someone purchasing a house for the first time may have access to grants, loans, and financial help that can make buying a home easier.

Fixed-Rate Mortgage – A home loan that has a fixed interest rate for the entire term of the loan.

Refinance

• Cash-Out Refinance – Replaces your current home loan with a larger mortgage, allowing you to access the equity you’ve built up in your home and receive that in cash. 
• No Cash-Out Refinance – When someone refinances their home for less than or the same amount they still owe, plus the closing costs on the new mortgage.

Amortization – This is a financial term that refers to a period in which a debt is reduced or paid off by regular payments.

Annual Percentage Rate (APR) – The cost of credit on a yearly basis.

Closing Costs – Processing fees you pay to your lender that are associated with closing a loan.

Credit Profile – An electronic record of your credit activities.

Down Payment – The amount of money a consumer or business puts towards a purchase.

Escrow – This is a neutrally managed place where all involved parties can safely park their money. An escrow account is often used while closing on a home. Afterwards, your lender might set up an escrow account for you where you can pay your mortgage, taxes and insurance.

Escrow Account – An account that a mortgage servicer establishes or controls on behalf of a borrower to pay taxes, insurance premiums, or other charges with respect to a home mortgage loan.

Homeowners Insurance – Insurance you carry to protect your home and cover losses and damages.

Loan Term – A set period of time to repay your loan.

​​Prepayment Penalty – A fee that is incurred if the loan is paid off early.

Private Mortgage Insurance (PMI) Premiums – A type of mortgage insurance you might be required to pay for if you have a conventional loan. Like other kinds of mortgage insurance, PMI protects the lender—not you—if you stop making payments on your loan.

Property Tax – Paid for by an individual or entity who owns a property.

Net Worth – The difference between total assets and total liabilities as calculated for an individual or business.

Personal Financial Statement (PFS) – A document or spreadsheet that outlines an individual’s financial position at a given point in time. The statement typically includes general information along with a breakdown of total assets and liabilities.

Private Banking – Personalized financial services and products primarily offered to high-net-worth individuals, or those defined as having very high levels of income or investable assets.

Signature Banker or “Private Banker” – A banker working in a financial institution and caters to high-net-worth individuals.

Accounts Receivable/Payable – Accounts receivable is money owed to a company, while accounts payable is money owed by a company.

Cash/Treasury Management – Cash management services help businesses collect incoming payments quickly, manage and reconcile outgoing payments efficiently, keep surplus funds invested, and obtain timely and complete information on their bank accounts. These services are attractive to corporations and small businesses that have significant billings and payments or that need to put their money to work instead of leaving balances in noninterest-bearing accounts. Examples of cash/treasury management are remote deposit capture, direct deposit, wire transfers, and merchant card services.

E-commerce – Commerce that is conducted electronically, for example through websites and the internet.