Personal Finance and Banking Terminology

Vocabulary flashcards covering personal finance, banking terms, transaction processing, accounts, savings strategies, mortgages, and real estate concepts.

Clear

Banking term that indicates that a financial transaction has been processed and settled between the financial accounts and the institutions involved.

(PIN) Personal Identification Number

$4$-$6$ digit passcode required for most debit card transactions.

Register

Logbook used to track checking account transactions.

Third Party Check

Check originally written to one payee and then endorsed by the first payee to a second payee.

(ACH) Automated Clearing House

Network responsible for moving money between accounts.

Available Balance

Amount of money that can be spent from an account without risking overdraft; calculated by subtracting pending transactions from the current balance.

Balance

Amount of money in an account at a financial institution.

Canceled Check

A check that has been processed, cleared by the payor's bank, and paid to the payee; invalid for future use; acts as a legal proof of payment.

Cashier's Check

A secure bank check purchased by the payor that guarantees funds to the payee; used instead of a personal check for large transfers of money.

Check

Written, signed, and dated document or electronic equivalent that authorizes the bank to pay a specific amount of money to the payee from the payor's bank account.

Current Balance

Amount of money in an account at a financial institution; includes posted deposits and withdrawals, does not include pending transactions.

Overdraft

Transaction that brings an account balance below zero; bank overdraft fees are generally deducted from the account.

Inflation

Nation-wide increase in prices that results in a decrease in the purchasing power of money.

Savings Account

Interest earning account used to store money for short term and intermediate-term goals.

Sub-savings Accounts (Savings Buckets)

Online or app feature that visually separates a single savings account into multiple sub-accounts for tracking purposes; also called savings buckets.

CD Laddering

A strategy used to increase the liquidity of savings while also taking advantage of the higher interest rates often offered by CDs.

(APR) Annual Percentage Rate

Annual cost of borrowing money expressed as a percentage; includes the interest rate plus any additional fees or charges for borrowing.

(APY) Annual Percentage Yield

Annual rate of return or annual yield on a deposit account expressed as a percentage; accounts for compounding; higher rate is desirable.

Compound Interest

Interest calculated using the principal balance plus the interest earned over time; form of interest that increases money that is saved or owed exponentially.

Consumer Financial Protection Bureau

An organization that protects consumers from unfair and deceptive practices by financial institutions.

(FDIC) Federal Deposit Insurance Company

Agency of the U.S. government that regulates banks and insures deposition accounts for up to $\$250{,}000$ per depositor.

Earnest Money Deposit

A sum of money submitted with a real estate purchase and sale agreement demonstrating the buyer's intent to buy the property.

Escrow Account

An account managed by a third party to hold a buyer's deposit earnest money deposit, closing costs, and ongoing property taxes, and insurance payments until the sale is finalized.

(FRM) Fixed-Rate Mortgage

Mortgage with a fixed interest rate for the entire term of the loan.

Mortgage

Secured loan commonly used to purchase a house and property; the house is collateral for the loan.

Real Estate Broker

Individual trained and licensed to facilitate property transactions.

Rider

Additional homeowners insurance coverage for high-value items or unique situations that are not covered by the standard policy.

Seller's Market

Housing market in which demand for homes is higher than the supply.

Underwriting

Risk assessment process performed by a financial institution to determine the possibility, amount, and rate given for a loan or insurance policy.

Adjustable-Rate Mortgage

Mortgage with a low-interest introductory period that adjusts to the market rate annually for the life of the loan.

Floating a Check

Fraudulent practice of writing a check for more than the working balance in the account because a deposit is anticipated to clear the account before the check clears.