Banks are like temples of finance with their own special terms. It is important that you know all of the terms before cashing your next check. Learn the terminology to get the most out of your banking services.
As you read a financial brochure, you are likely to read plenty of normal words, which make sense. You probably think you understand everything until you look at the footnotes. The reality is that banking accounts are financial contracts with most of the detailed descriptions, only fully explained in the fine print. Here are buzz words, you might run across:
Annual Percentage Rate (APR)
How often is the interest rate calculated? The annual percentage rate (APR) is how much you can earn if you keep your money in the account for the full year.
Certificate of Deposit (CD)
The certificate of deposit (CD) involves a contract where you give the bank, money for a certain period of time and when it is over, the bank pays you interest thereon. This usually offers a higher rate than savings accounts.
The checking account is for paying everyday bills. It is wise to balance your checkbook, every month.
One of the secrets to making profits in the banking industry is “compound interest.” This not only gives you interest on the principle but also pays you interest upon the accumulated interest.
Your credit score is a number measuring your “creditworthiness” in the eyes of the financial industry. This important credit rating can determine if you receive a loan and the associated interest rate.
Federal Deposit Insurance Corporation (FDIC)
The Federal Deposit Insurance Corporation (FDIC) guarantees all bank accounts up to $250,000 per depositor, per FDIC-insured bank and per ownership category.
Non-Sufficient Funds Charge (NSF)
The Non-Sufficient Funds (NSF) Charge is also called the Overdraft Fee in some environs. When you write a check for more than you have in your account, you will be charged this amount. You can also get “Overdraft” coverage at some banks, which will pay any amount above what you have in your banking account.
The savings account will usually be interest-bearing. It might even have an account minimum; when you fall below this minimum, you will be charged a fee.