Glossary of Banking Terminology

Explore this financial resource to learn about key banking definitions and terminology

At Citizens, your knowledge about our products is a top priority because it ensures that you’re able to make smart financial decisions catered to your personal needs. Use this bank glossary as a resource to familiarize yourself with common banking terminology and bank account definitions so when you’re ready to make an investment, or open an account you feel comfortable with bank definitions for the financial resources you need.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

529 Savings Plan

An account used to save for college expenses that are authorized by Section 529 of the Internal Revenue Code.

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A

Account Balance

The total amount of money currently in your account. This balance differs from Available Balance in that the Account Balance may include funds not available to spend. This includes funds that are part of a debit card authorization hold for purchases that have been authorized, but not yet posted, as well as funds from deposits you’ve made that are not yet available as a result of our Funds Availability Policy.

Account Statement

A document, available either by mail or online, that displays account information over a defined period of time, most typically a month. Statement information usually includes your account number, starting balance, all withdrawals and deposits posted during the statement period, and an ending balance.

Annual Percentage Yield (APY)

On interest-bearing accounts, the annual percentage yield is the amount you will earn on your money over the course of a year. Expressed as a percentage, the APY takes into account both the interest rate and the frequency of compounding interest.

Automated Clearing House

Utilized in the United States, an automated clearing house (ACH) is an electronic network for processing both credit and debit transactions online. Automatic payments for bills such as student loans may be set up through ACH.

Automatic Funds Transfer

The scheduled, online movement of funds from one account to another on a pre-determined schedule.

Automatic Payment

Automated, scheduled payments you authorize to be made directly from your bank account to the payee. Payments are usually made on a scheduled frequency determined by the account holder.

Available Balance

The portion of your Account Balance available to spend or withdraw at any given time. This balance takes into account all items that have posted to your account (such as debit card purchases or ATM withdrawals) as well as any debit card authorization holds or pending online bill payments that have been authorized but have not been posted. You can find your Available Balance through online or mobile banking*, an ATM, by phone or by visiting a branch.

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B

Bounced Check (also referred to as Returned Item)

A check that is returned unpaid because the Available Balance in your account at the time the payment is submitted for processing is less than the amount of the check. Bounced checks usually will lead to the bank charging a fee to your account. If you do bounce a check, it’s important to contact your bank immediately to correct the situation.

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C

Cancelled Check

A check that has been approved and paid by your bank to the payee that now serves as record of payment. You can choose to have your cancelled checks returned to you by the bank for your records, or view scanned images of them through online banking*. Also known as a "cashed check".

Cash-Out Refinance

A refinancing option that uses your home’s equity as collateral for a new mortgage loan of a larger amount than your existing balance. The difference is paid to you in cash.

Certificate of Deposit (CD)

A bank account that has a required period of time during which funds must be left in the account. If you withdraw the funds prior to the date of maturity, there will likely be a fee. The maturity period can be anywhere from a few months to several years.

Check

A written or electronic order directing your bank to pay a specific amount of money from your checking account to the payee on the check.

Checking Account

A transactional account from which the account holder(s) can make deposits and withdraw funds.

Closing Costs

Closing costs include items like title insurance fees, attorney or settlement agent fees, pre-paid interest, and documentation fees — to name a few. These costs vary for each customer based on the type of mortgage, the property’s location, and other factors.

Conventional Loan

A loan that is not insured or guaranteed by the federal government.

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D

Debit Card

A form of payment in which a plastic card is used to deduct money directly from a checking account to cover the cost of a purchase. Purchases can typically be made with a PIN or an authorized signature. Debit cards are also used to withdraw funds from an ATM.

Debt-to-Income (DTI) Ratio

The cumulative sum of your monthly debt payments. These may include student loans, auto loans, credit cards, and an estimate of your new mortgage payment divided by your total monthly household income before taxes.

Deposit Account

Any account designed for saving money. This includes CDs, money market accounts and traditional savings accounts.

Direct Deposit

A service provided by banks in which recurring deposits such as salary, Social Security benefits or other forms of income are automatically credited to checking or deposit accounts.

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F

Funds on Hold

Funds in your account which are not currently available for use. Funds can be on hold for a number of reasons. The two most common reasons include:

1. Debit card purchases: When you use your debit card without your PIN, it may result in a debit card authorization hold on your funds. This hold amount is immediately debited from your Available Balance. It remains on your account until final settlement of the transaction or the expiration of the hold, whichever occurs first. You may see these listed as “pending transactions” until they post.
2. Deposited checks: When you deposit a check, the amount of deposited funds you have immediate access to is based on the bank’s Funds Availability Policy as well as the timeframe of how quickly the check clears. You may not see the full amount reflected in your Available Balance immediately.

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G

Government Loan – (FHA Loan/VA Loan)

Mortgage products insured by the U.S. government — for instance, through the Federal Housing Administration (FHA) or U.S. Department of Veterans Affairs (VA). Borrowers must meet certain requirements to qualify but approval guidelines may be more flexible.

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H

Home Equity Line of Credit (HELOC)

A revolving line of credit that uses your home’s equity as collateral. The amount you can borrow is based on the value of your home minus any mortgage(s) or debt you may have secured by your home. Like a credit card, you’re approved for a set amount of credit (based on the equity in your home). It’s available for a 10-year draw period during which you’re only required to make monthly interest payments on the portion you use. However, you also have the option to make principal and interest payments in order to repay your debt faster.

Home Equity Loan

A fixed-rate loan — or second mortgage — that uses your home equity as collateral. Provided in one lump sum, the loan amount is based on the value of your home minus any mortgage(s) or debt you may have secured by your home.

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I

Individual Retirement Account (IRA)

A savings account that offers significant tax advantages and is designed to be accessed upon retirement.

Insufficient Funds

When the Available Balance in an account is not sufficient to cover a check or payment attempted on the account. Having insufficient funds typically results in an overdraft and a fee. This is also referred to as nonsufficient funds (NSF).

Interest

Money that the bank pays the holders of savings accounts on deposits. Typically, it's paid monthly and is calculated as a percentage of the funds kept in the account.

Interest-Bearing Checking Account

A checking account that pays interest at a specified interest rate on the balance held in the account.

Interest Rate

The disclosed percentage rate paid on balances in interest-bearing checking and savings accounts.

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J

Joint Checking Account

A transaction bank account shared between two parties where all funds are available to either party. Joint savings accounts are also available.

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M

Maturity Date

The date at which funds invested in a Certificate of Deposit can be withdrawn without penalty or reinvested.

Minimum Balance

The smallest amount of money required to open or maintain a checking or savings account without incurring a fee. Minimum balance requirements are not applicable to all accounts.

Money Market Account (MMA)

An account that generally has a higher interest rate than traditional savings accounts. A longer-term savings tool – similar to CDs – money markets usually allow for a limited amount of transactions each month.

Mortgage:

A fixed- or adjustable-rate loan used in conjunction with a down payment to purchase a home, condo, or other type of property, which then serves as collateral. To pay off the loan, you make regular monthly payments comprised of principal, interest, and escrow.

Adjustable-Rate Mortgage:

A home loan with an interest rate that can change over time. Most ARMs feature an initial fixed-rate period, typically from 3 to 10 years, after which the rate can go up or down as market rates change. Typically, ARMs have a lower starting interest rate than fixed-rate mortgages, and can appeal to homebuyers who plan to move or refinance their mortgage before the fixed period ends.

Fixed-Rate Mortgage

A fixed-rate mortgage features an interest rate that doesn’t change over the life of the loan, so the principal and interest portion of your monthly payment won’t change. However, since homeowner’s insurance and property tax rates may change, the total monthly payment may still fluctuate slightly.

Jumbo Mortgage

Any mortgage with a loan size above what government agencies, such as Fannie Mae, are willing to buy from banks. Jumbo mortgages may have more stringent qualifying requirements, such as a higher credit score and higher down payment.

Mortgage Escrow

A portion of your mortgage payment used by the bank or mortgage company that services your loan to pay the taxes and insurance on your property.

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O

Online Banking

24/7 access to your bank accounts via secure login through the Internet used for checking your account balances as well as managing online bill payments and funds transfers.*

Online Bill Pay

A service that enables you to access and pay your bills through your online banking, either as one-time or automatic recurring payments.*

Overdraft

An overdraft occurs when you don’t have enough money in your account to cover a transaction, but the bank covers the transaction on your behalf. If you do not have overdraft protection, a fee is applied to your account when an overdraft occurs.

Overdraft Protection

A service that links your checking account to either a savings or line of credit account so that funds can be automatically transferred before an overdraft occurs. There is typically a charge for overdraft protection.

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P

Personal Identification Number (PIN)

A private combination of numeric and/or alphanumeric characters used with a debit card or username to authenticate your account.

Preapproval

Before you shop for a home, your real estate agent will likely ask you for a preapproval letter. This outlines how much the mortgage lender would be willing to lend you for the purchase of a home. Once received, it shows sellers and real estate agents how much financing you’re able to get to purchase a home.

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R

Relationship Banking

A business strategy banks aim to achieve by creating strong customer relationships, which result in a one-stop banking experience for customers who prefer to maintain one banking relationship for all of their financial needs.

Returned Item

A check or payment that is returned unpaid because the Available Balance in your account at the time the payment is submitted for processing is less than the amount of the item. A fee is applied to the account when an item is returned.

Roth IRA

An individual retirement account in which contributions are not tax deductible. Qualified distributions are tax free.

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S

Savings Account

A bank account designed to encourage saving by paying interest. Savings accounts are not intended for regular transaction activity, though many banks will allow a limited number of transactions per month.

Savings Bond

A savings vehicle issued by the U.S. government and available for purchase at Citizens. A savings bond is purchased for less than its face value. The bond matures over a set period of years, at which point it reaches its face value and can be cashed in.

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T

Traditional IRA

An individual retirement account in which contributions may be fully or partially tax deductible. In most cases, earnings and gains are not taxed until they are distributed.

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Talk to a Citizens representative for additional financial resources or to open a bank account

This bank glossary is designed to provide a basic understanding of bank account definitions and banking terminology so you can make the most of your financial resources. Be sure to contact a Citizens representative for further assistance or to answer any of your questions.

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