ABA transit number or routing transit number: A unique identifying number assigned to each Financial Institution by the American Bankers Association under the national numerical system to facilitate the sorting and processing of checks and electronic payments.

Annual Percentage Rate (APR): The true cost of credit on a yearly basis. Expressed as a percentage, the APR results from an equation that considers the amount financed, the finance charge and the term of the loan.

Annual Percentage Yield (APY): A percentage rate reflecting the total amount of interest paid on an account, based on the interest rate and the frequency of compounding for a 365 day period.

Accounts Receivable Check Conversion (ARC): Refers to the process by which a personal check may be converted to an electronic (ACH) payment for clearing overnight.

Automated Clearing House (ACH): A computerized facility that electronically processes payments. Payments may be initiated by a variety of means including web, telephone, or accounts receivable check conversion.

Automatic Payment: An arrangement that authorizes payments to be deducted automatically from a bank account (usually checking or savings) to pay bills (such as insurance payments, rent, mortgage or loan payments). Payments are usually scheduled to be made on a certain day of the month.

Automatic Transfer: An arrangement that moves funds from one account to another automatically on a pre-arranged schedule; for example, every payday or once a month.

Availability: The unrestricted access by a depositor to funds in an account.

Available balance: The portion of a customer's account balance on which the bank has placed no restrictions, making it available for immediate withdrawal.

Backup withholding: The procedure by which a payer of interest must withhold a portion of that interest under certain conditions, for remittance to the IRS or other taxing authority.

Balloon payment: The last payment on a loan when the payment is substantially larger than earlier payments.

Bank Secrecy Act: Federal legislation that requires banks to report cash transactions that exceed $10,000 in any single day and requires that the bank maintain certain records (copies of checks paid, deposits, and so forth). The act is intended to inhibit laundering of funds obtained through illegal activities.

Beneficiary: The party who is to receive the proceeds of a trust, insurance policy, letter of credit, account or transaction.

Cashier's Check: A check, also known as a bank check, treasurer's check, or official check, drawn by a bank on itself. Since the drawer and drawee are one and the same, acceptance is considered automatic and such instruments have been legally held to be promises to pay.

Certificate of Deposit (CD): A time deposit with a maturity date that generally pays higher interest rates than other types of deposit accounts. Maturities can range from seven days to 10 years. Insured by the FDIC up to the maximum allowed by law. A penalty may be assessed if funds are withdrawn before the maturity date.

Certified Check: A depositor's check across the face of which an authorized party in the drawee bank has stamped the work "certified" and added a signature and date. By certifying a check, the drawee guarantees that sufficient funds have been set aside from the depositor's account to pay the item. A certified check is a promise to pay and therefore is an obligation of the drawee.

Check 21: The Check Truncation Act for the 21st Century. This legislation took effect October 28th 2004, and essentially gives an Image Replacement Document (IRD) or "Substitute Check" the same legal status as a check. This allows truncation of checks at the point of presentment and clearing of the payment by the exchange of images.

Check: A demand draft drawn on a bank or other financial institution offering checking accounts.

Check truncation: A term used to describe the conversion of a paper check to an electronic payment or digitized image for clearing, posting and settlement. Check truncation reduces the physical workload of processing paper checks.

Clearing: The process or method by which checks and/or other point-of-sale transactions are moved, physically or electronically, from the point of origin to a bank or other financial institution that maintains the customer's account.

Commercial loan: Credit extended by a bank to a business, most frequently on a short-term and unsecured basis.

Community Reinvestment Act (CRA): A law passed in 1977 that requires banks and other financial institutions to meet the credit needs of their communities, including the low- and moderate-income sections of those communities. The act also requires banks to submit reports concerning their investments in the areas where they do business. A bank's compliance with the CRA is evaluated whenever the bank files a request for an expansion of business, such as an application for a new branch.

Compounding: Interest added to interest previously earned on a principal balance. The more frequently interest is compounded, the higher the effective yield.

Construction Loan: A short-term loan, often unsecured, to a builder or developer to finance the costs of construction. The lender generally requires repayment from the proceeds of the borrower's permanent mortgage loan. The lender may make periodic payments to the borrower as the construction work progresses.

Corporate resolution: A document filed with a bank by a corporation. It defines the authority given to the corporation's officers and specifies who may sign checks, borrow on behalf of the corporation, and otherwise issue instructions to the bank and conduct the corporation's business. The powers listed in the resolution are granted by the corporation's directors.

Debit card: A plastic card enabling the cardholder to purchase goods or services, the cost of which is immediately debited to his or her bank account. Debit cards activate point-of-sale terminals in supermarkets, stores, and gas stations. Also known as a check card.

Debt to income ratio: Total monthly obligations divided by a borrower's qualifying income.

Decedent: A term used in connection with wills, estates, and inheritances to describe a person who has died.

Demand deposit: Funds that may be withdrawn from a bank without advance notice.

Dormant account: A customer relationship that has shown no activity for a period of time.

Draft: A signed, written order by which one party (the drawer) instructs another (the drawee) to make payment to a third (the payee).

Drawee: The party to whom the drawer issues instructions to make payment. In the case of checks, the drawee is a bank or other financial institution.

Drawer: The party who issues a set of written instructions to a drawee, calling for a payment of funds.

Electronic Funds transfer: The use of automated technology to move funds without paper checks.

Encoding: The process of inscribing or imprinting MICR data on checks, deposit slips, debit and credit tickets, or other bank documents. The MICR data is printed with a magnetic ink, enabling easier reading of the data by document scanning or sorting devices in the clearing process.

Endorsement: A signature (other than the signature of the maker, drawer, or acceptor) that is made on an instrument for the purpose of negotiating the instrument, restricting payment of the instrument, or incurring endorser's liability on the instrument.

Equity: Difference between the appraised value and the outstanding principal balance.

Escheat: The legal principle by which a state government is entitled to receive funds that have remained in dormant accounts for a period of time and whose owners have not been located. In the State of New Jersey the escheat period is three years for demand and savings accounts and three years after the earlier of the maturity date of a CD or the date of last contact with the customer.

Estate: The sum total, as determined by a complete inventory, of all the assets of a decedent.

Executor, Executrix: A party named in a decedent's valid will to settle an estate and qualified by a court to act in this capacity. A female executor is called an executrix.

Federal Deposit Insurance Corporation (FDIC): The agency of the federal government, established in 1933 to provide insurance protection, up to statutory limits, for depositors at FDIC member institutions. All national banks and all Fed member banks must belong to the FDIC; other commercial banks and savings banks may also join if they wish. Under the provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), the responsibilities of the FDIC were greatly expanded.

Fiduciary: An individual, bank, or other party to whom specific property is turned over under the terms of a contractual agreement and who acts for the benefit of another party on a basis of trust and confidence.

Fixed rate: A rate of interest charged for a loan or paid to an interest-bearing deposit account that does not vary for the term of the loan or deposit. Refers to time deposits that have a rate that is fixed for the specified maturity period.

Float: The dollar amount of deposited cash items that have been given immediate, provisional credit but are in the process of collection from drawee banks. Also called uncollected funds.

Guardianship: The trust relationship, established by a court appointment, in which a trustee holds in safekeeping and manages certain property for the benefit of a minor or incompetent person.

Hold: A restriction on the withdrawal of all or any part of the balance in an account.

Home Banking: A group of bank services designed to enable customers to obtain current information about their accounts and initiate certain transactions through a telephone or computer terminal link to the bank.

Home Equity Loan: A type of real estate credit in which the homeowner borrows against the value of his or her residence through a second mortgage. The lending bank frequently establishes a home equity line of credit against which the borrower can draw at any time.

Image Statement: A bank statement that contains images of the paid checks.

Individual Retirement Account (IRAs): Tax-deferred accounts into which a customer, subject to the restrictions in the Tax Reform Act of 1986, can make deposits and earn interest for retirement purposes. Withdrawals from IRAs are not permitted, without penalty, until the depositor reaches age 59 1/2.

Installment Loan: A loan made to an individual or business, repaid in fixed, periodic payments.

Insufficient Funds: A banking term indicating that the drawer's balance does not contain sufficient funds to cover a check or checks. Commonly abbreviated NSF.

Insured bank: A bank that is a member of the FDIC.

Interest: Money paid for the use of money.

Interest rate: The rate paid on an interest-bearing account, such as savings, CDs and some checking accounts; also, the rate charged on a loan or line of credit. Different types of accounts and loans pay or charge different rates of interest.

Intestate: The legal term used to describe a decedent who did not leave a valid will.

Image Replacement Document (IRD): A reproduction of a check from a digital image of the original. Under new Check 21 legislation, an IRD will have the same legal status as the original check. Also called a "Substitute Check".

Joint tenancy: The holding of property by two or more parties on an equal basis, conveying rights of survivorship.

Legal tender: The authorized currency, backed by the government, that must be accepted in payment of all public and private debts.

Letters of administration: Documents issued by a court establishing the estate of the deceased and appointing the administrator of the estate. Also called letters testamentary.

Letters testamentary: Documents issued by a court establishing the estate of the deceased and appointing the executer/executrix of the estate. Also called letter of administration.

Lien: A legal claim or attachment filed on record against property as security for the payment of an obligation.

Living trust: A trust fund that becomes effective during the lifetime of the trustor (settlor).

Loan to value ratio (LTV): Loan amount divided by the appraised value or sales price, whichever is less.

Local check: As defined by Regulation CC and the Expedited Funds Availability Act, a deposited check that is drawn on another bank in the same Fed check processing region.

Magnetic ink character recognition (MICR): The encoding of checks and documents with characters in magnetic ink so that they can be electronically "read" and processed. Information such as the bank routing number, account number, check number and check amount are printed near the bottom of a check with this magnetic ink.

Maturity: The date on which a note, draft, bond, or acceptance becomes due and payable.

Microfilm: The photographic process that reduces checks and other documents for record-keeping and storage purposes.

Minimum balance: The amount that a depositor must have on deposit in an account to qualify for special services or to avoid service charges.

Minimum daily balance: The minimum amount that may be required to be kept in an account each day to earn interest, avoid a service charge or qualify for special services. See also, Average balance.

Mortgage loan: Real estate credit, usually extended on a long-term basis with the mortgaged property as security.

Mutual savings bank: A savings institution that has no stockholders and is owned by the depositors, who elect the board of trustees to manage it.

Negotiable order of withdrawal (NOW) account: A type of account that permits the depositor to earn interest while at the same time having check-writing privileges.

Non-local check: As defined by Regulation CC and the Expedited Funds Availability Act, a deposited check that is drawn on another bank located in a different Fed check processing region.

Nonsufficient funds (NSF): A situation in which a check (or other type of withdrawal) may not be paid because the balance in the account is less than the amount of the check.

On-us check: A check deposited or negotiated for cash at the bank on which it is drawn.

Origination fee: Fee charged by a financial institution to cover the cost of administering a loan from application to closing.

Outstanding check: An issued check that has not yet been presented for payment to, or paid by, a drawee.

Overdraft: A negative (minus) balance in an account, resulting from the paying (posting) of checks for an amount greater than the depositor's balance.

Passbook: A record supplied by a bank, showing customer transactions on an account, such as deposits, interest earnings, and withdrawals. Passbooks have largely been replaced by sending computer generated statements to customers.

Payable on Death (POD): A beneficiary of an account to whom the funds would be granted upon the death of the account holder(s).

Payee: The beneficiary of an instrument; the party to whom the payment is to be made.

Personal Identification Number (PIN): A number or word used by a cardholder or randomly assigned by the card issuer to provide personal security in accessing a financial service terminal and prevent use of a bank card by unauthorized parties.

Platform: A term commonly used to describe the portion of a bank's lobby area where officers, new account representatives, and customer service personnel are located.

Private Mortgage Insurance (PMI): Insurance premium paid by borrower when the loan amount is greater than 80% of the appraised value of the home.

Point of Deposit (POD): The place or institution that accepts a check and gives the customer credit for the deposit instrument.

Point of sale (POS): The location in a merchant establishment where a sale is consummated by payment for goods or services received.

Postdated check: Bearing a future date. A postdated item is not valid until that date is reached.

Power of attorney: The legal document by which one party is authorized to act on another's behalf.

Preauthorized payments: A service offered by banks to customers, enabling them to request that funds be transferred to a creditor's account on a regular, fixed basis.

Principal: (1) The sum of money stated in an account, a contract, or a financial instrument; for example, the amount of a loan or debt exclusive of interest. (2) The primary borrower on a loan or other obligation. (3) A person who appoints another party to act for him or her as agent. (4) The property of an estate. (5) The individual with primary ownership or management control of a business.

Probate: The judicial determination concerning the validity of a will and all questions pertaining to it. The first step in the settling of an estate. Also the name of the special court that handles probate matters.

Proprietorship: A business venture operated by a single owner.

Provisional credit: Credit that was previously given but may be reversed if the item deposited is returned unpaid by the paying bank.

Refinancing: (1) To retire existing loans or notes by changing their terms or by making new borrowing arrangements. (2) To retire existing securities by selling new issues.

Restrictive endorsement: An endorsement that limits the future actions of the next holder. The most common example uses the words "For deposit only."

Return on assets (ROA): A financial measurement that indicates how efficiently a bank's assets are being used. It is usually determined by dividing net profits by average total assets.

Return on equity (ROE): A financial measurement that indicates how efficiently the bank's equity capital has been put to profitable use. It is usually calculated by dividing net profits by average net worth.

Right of survivorship: The right of one surviving tenant to take full possession of specific assets upon the death of the other tenant, subject to tax laws.

Savings account: An interest- bearing relationship used by a customer to accumulate funds. Savings accounts have no fixed maturity date.

Savings Bond: A non-negotiable security issued by the US Treasury Department and not subject to market fluctuations.

Sole proprietorship: A business venture owned and operated by one person.

Statement savings: A savings account in which a periodic statement, usually computer-generated, replaces the traditional passbook.

Stop payment: A depositor's instructions to a drawee, directing the drawee to dishonor a specific item.

Substitute Check: A paper reproduction of the original check that (a) contains an image of the front and back of the original check; (b) bears a MICR line containing all the information appearing on the MICR line of the original check, except as provided under generally applicable industry standards for substitute checks to facilitate the processing of substitute checks; (c) conforms, in paper stock, dimension, and otherwise, with generally applicable industry standards for substitute checks; (d) is suitable for automated processing in the same manner as the original check; and (e) bears a legend stating "This is a LEGAL COPY of your check. You can use it the same way you would use the original."

Tenants in common: The holding of property by two or more persons in such a manner that each has an undivided interest that, upon the death of one, passes to the heirs or devisee(s) and not to the survivor(s).

Testamentary trust: A trust fund created under the terms of a will.

Testate: The legal term for one who has died and left a valid will; the opposite of intestate.

Tiered rate: Refers to a deposit account that has two or more interest rates that are applicable to specified balance levels.

Time deposit: A relationship carrying a specified maturity date, usually bearing interest and restricting the depositor's ability to make withdrawals before the maturity date. Also known as a Certificate of Deposit or CD.

Traveler's check: A negotiable instrument sold by a bank or other issuer in various denominations for the convenience of individuals who do not wish to carry cash. These checks are readily convertible into cash upon proper identification, usually by a signature in the presence of the cashing party. They are insured instruments that can be replaced by the insurer if they are lost or stolen.

Truncation: A generic term for the various banking systems designed to reduce the need to send or physically handle checks for customer's accounts.

Trust: An agreement or contract established by agreement or declaration, in a will, or by order of a court, under which one party (the trustee) holds legal title to property belonging to another, with a specific benefit in mind.

Trustee: The party holding legal title to property under the terms of a trust.

Unauthorized signature: A signature affixed to a negotiable instrument by the party or parties who do not have the legal right to issue instructions regarding its handling.

Uncollected funds: Refers to items deposited in an account that have not yet been collected, or paid, by the bank on which they were drawn.

Uniform Commercial Code (UCC): The body of laws, adopted in whole or in part by most states, pertaining to financial transactions such as bank deposits and collections, letters of credit, and title documents.

Uniform Gifts to Minors Act: Legislation adopted in certain states that provides tax relief for individuals who make irrevocable gifts of money or property to underage beneficiaries.

Variable rate: An interest rate that varies during the maturity period of a time deposit or loan.

Wire transfer: A transaction by which funds are electronically moved from one bank to another or from account to account, upon a customer's instructions, through bookkeeping entries.

Yield: (1) In investments, the rate of return expressed as a percentage of the amount invested. (2) In loans, the total amount earned by a lender, expressed on an annual percentage basis.