When you visit your local financial institution to deposit all that well-earned money you’ve worked for, do you feel overwhelmed with the lingo the staff throw at you? If it sounds like Latin to you, below is a glossary of terms that will help you make a little more sense of what those words mean. Don’t hesitate to use this glossary when you’re reading the financial section of the Wall Street Journal, it will help.
100 Mile Mortgage - The purpose of a 100 Mile Mortgage is to help our community keep its interest and money circulating locally. Logically, our preference is to lend our member’s deposits back into our local economy. How we spend our money as a community can make a difference!
Account - money deposited with a financial institution
Assets - items of monetary value (e.g. house, land, investments)
Amortization - the gradual payment of debt over a period of time by installments
ATM (ABM) - Automated Teller Machine (Automated Banking Machine)
ATM Card - a card used to access funds in personal accounts via ATM cash withdrawals or point-of-sale (POS) purchases at retailers. Account is debited automatically once transaction completed.
Barter - to trade goods or services without the exchange of money
Bounced Cheque - a cheque an institution has refused to cash because there are no funds to cover it (NSF)
Budget - a prediction of an individuals income and expenses.
Beacon / FICO Score - This is the credit score that creditors look at when determining your credit worthiness. It ranges from 300 – 900 points and incorporates a variety of factors about your financial behaviour. This helps lenders assess the likelihood that you will pay them back the money you are borrowing from them.
Co-operative Philosophy - the six principles of co-operation are
1) open and voluntary membership
2) democratic control (one member equals one vote)
3) limited interest on shares
4) return of surplus to members
5) co-operative education
6) co-operation among co-operatives
Cheque - any written document instructing a bank to pay money from writers account
Cleared Cheque - when the cheque written is debited from the writer's (drawer's) account and debited to the payee's account.
Collateral - an item pledged to guarantee the repayment of a loan, such as property, bonds, terms or stocks
Compounding or Compund Coolness - earning income on your income: interest calculated on the principal and on interest accumulated-now that's cool!
Co-operative - a democratic institution owned and controlled by its members that provides a unified voice and structure to a group of individuals who have pooled their resources to achieve common goals
Credit - an arrangement to receive/access cash now and pay later
Credit Card - a credit card is part of a system of payments named after the small plastic card issued to users of the system. It is a card that entitles its holder to buy goods and services based on the holder's promise to pay for these goods and services at a later date.
Credit Rep or Credit History - a record of a borrower's debt commitments and debt payments
Credit Union - a financial institution; financial co-operative credit association organized by a group of people who have a common bond. It operates primarily by accepting deposits from members, making loans to members and providing a variety of other financial services.
CHIP card (Debit and Credit) - A chip card, or “smart card”, is a card product containing a microcomputer embedded right into the plastic. It is like having a personal computer right on your card that is capable of performing a variety of functions, including card authentication, PIN verification, and information storage, all in a highly secure environment. For you, chip will mean entering a PIN at chip-reading terminals for every transaction regardless if you are paying by debit or credit card.
Credit Bureau - A company that is licensed to collect and compile information about your financial behaviour. The information comes from a variety of credit granting sources as well as public records information. In turn, they sell the information, in the form of a credit report, to those authorized to obtain it.
Debit - an arrangement to withdraw funds from an account
Debit Card - a card used to access funds in personal accounts via ATM cash withdrawals or point-of-sale (POS) purchases at retailers. The account is debited automatically once the transaction is complete.
Deposit - money placed in an active account. This can be done through a teller, ATM (hold), speed deposit, and envelope depository.
Deposit Insurance - all depositors' funds are fully insured (BC Credit Unions) and $100,000 (Big Bank) per depositor, per institution in the event of the failure of the institution in Canada.
Endorse - to sign the back of a cheque made out to yourself the payee. The first endorsement must be made by the payee to authorize the transaction.
Ethical Investing - see Socially Responsible Investing
eStatement - eStatements are electronic copies of your mailed paper account statements
Financial Hike - your Financial Hike starts with identifying your goals. Nelson & District Credit Union creates a personalized guidebook to help you reach them. Healthy, long-term strategies incorporate all elements of your financial affairs. How you pack one element influences how you pack another. We offer professional financial planning and access to virtually every investment product and service in the marketplace today. Please contact us at email@example.com for more information.
FI - financial institution
Financial Plan - A financial plan can be a budget, which is a plan for spending and saving future income. This plan allocates future income to various types of expenses, such as rent or utilities, and also reserves some income for short-term and long-term savings. A financial plan can also be an investment plan, which allocates savings to various assets or projects expected to produce future income, such as a new business or product line, shares in an existing business or real estate.
GIC (Guaranteed Investment Certificate) - an investment, like a term deposit
Hold (ATM/ABM) - a deposit into an ATM cannot be verified until it is physically removed from the cash machine. Because of this delay, a deposit of cash or cheque will often be held a significant number of days. Cheques are deposited through ATMs because of their convenience.
Since there is no way to verify immediately the details of an ATM deposit, in most cases it will be considered riskier to an FI and the hold-funds period may be longer than if the cheque had been deposited through a teller. Contributing to the increased risk in these circumstances are additional uncertainties:
Is the amount the client claims to be depositing the same as shown on the cheque?
Is the deposit envelope empty?
Because ABM deposits are not necessarily verified at a branch, these questions will only be answered after the envelopes arrive at the data centre for inspection and processing. Only then may the hold-funds period be readjusted according to the nature of the deposit. ABMs are emptied on a regular basis, and the items are sent to the appropriate data centre for processing. However, if a deposit is made shortly after a machine has been emptied, that deposit will remain in the ABM until it is next serviced, which may be the following day.
Hold - a teller may put a hold on a deposited cheque until it clears the payor’s financial institution.
When a cheque is accepted on deposit, the negotiating FI will estimate the latest date an item might come back for a “charge back” to the account. This time in transit may affect the hold period, if any, that is placed on the cheque. Other factors that may affect whether an item is placed on hold are:
1)the depositor’s history (Have many cheques been returned?)
2)the client’s average account balance (Are there enough funds in the account to charge back the item if necessary?)
3)the length of time the customer has been a client of the FI (The “know-your-customer” rule-of-thumb may apply)
4)the client’s relationship with the branch (Is the client a customer of that branch or another branch of the same FI?)
5)the value of the item;
6)the FI’s own in-house guidelines for the number of days a hold is to be effective;
7)the time of deposit (Is this a weekend deposit? an after-hours deposit? a statutory long weekend?);
8)the type of cheque (Is it a personal or company cheque?);
9)any unusual account activity.
In essence, the length of time an item is placed on hold is an individual business decision on the part of the negotiating FI and can vary from institution to institution and from customer to customer.
Home Banking - allows customers to conduct financial transactions on a secure website operated by their credit union or bank
inflation - the overall general upward price movement of goods and services in an economy, usually as measured by the Consumer Price Index and the Producer Price Index. Over time, as the cost of goods and services increases, the value of a dollar is going to fall because a person won't be able to purchase as much with that dollar as they previously could. While the annual rate of inflation has fluctuated greatly over the last half century, ranging from nearly zero inflation to 23% inflation, the Bank of Canada actively tries to maintain a specific rate of inflation, which is usually 2-3% but can vary depending on circumstances. opposite of deflation.
Insurance - the act of assuring against loss or damage
Interest - an amount of money paid or earned for the use of money
Investment - anything acquired for the purpose of producing income or profit, or to act as an asset
Internet Banking - allows customers to conduct financial transactions on a secure website operated by their credit union or bank
Line of Credit - a pre-approved amount that a lender is prepared to make to a borrower for them to draw from
Loan - money lent on a temporary basis with interest charged for its use
Maturity - the date when an investment product is due
Mortgage - a personal loan used to purchase property where that property is pledged as security for that loan
Mutual Fund - an investment product that pools your money with other investors' money. A portfolio manager uses the pooled money to by a portfolio of investments that are managed on an ongoing basis. Mutual funds fluctuate and do not provide a guaranteed return. Speak to one of our investment advisors, firstname.lastname@example.org.
NSF - Not sufficient funds/insufficient funds. A returned item due to lack of funds in account. A service charge is levied.
Online Banking - allows customers to conduct financial transactions on a secure website operated by their credit union or bank
Overdrawn - money accessed from an account without enough funds available
Payee - one to whom money is to be paid
Payor - one that pays; especially the person who is required to pay a bill or note
Point-of-Sale (POS) - a retail shop, a checkout counter in a shop, or the location where a purchase or like transaction occurs.
Principal - the original amount of money borrowed for a loan before interest.
RRSP - a registered retirement savings plan (RESP) approved by the federal government. Investment is tax deductible and income earned is tax sheltered until drawn.
RESP - A Registered Education Savings Plan (RESP) is designed to help you save for the post-secondary education of a child or other beneficiary.
Although RESP contributions are not tax-deductible, they do allow savings to compound and grow tax-free until the beneficiary (child) is ready to go full-time to college, university, or another post-secondary educational institution.
Service Fees - the monthly fees charged by a financial institution for handling an account
Socially Responsible Investing (SRI) - also known as sustainable investing, socially-conscious or ethical investing. It describes an investment strategy that seeks to maximize both financial return and social good. In general, socially responsible investors favour corporate practices that promote environmental stewardship, consumer protection, human rights and diversity.
Stop Payment - a request made to halt payment of a specific cheque
Stock - A type of investment that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. A holder of stock (a shareholder) has a claim to a part of the corporation's assets and earnings. In other words, a shareholder is an owner of a company. Ownership is determined by the number of shares a person owns relative to the number of outstanding shares. Stocks are a riskier type of investment.
Teller - the person who carries out transactions in the branch on your behalf
Term Deposit - A term deposit is money deposited for a fixed period of time at a fixed rate. These conservative (less risky) investments give you guaranteed return and are generally short-term with maturities ranging anywhere from a month to a few years.
TFSA - In the 2008 budget, the government of Canada introduced a brand new personal savings vehicle: the Tax-Free Savings Account (TFSA), to help you save for different purposes throughout your lifetime.
As of January 2, 2009, you are able to start contributing to a TFSA, which can hold any combination of eligible investment vehicles, such as cash, stocks, bonds, GICs and mutual funds, the growth of which will be tax-sheltered.
Transfers - a transfer of money between your own account or to another person. This can be done through a teller, ATM, phone or internet.
Withdrawals - money taken from an active account. This an be done through a teller or ATM (be conscious of service fees, use your own institution's ATM).
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Disclaimer: This website is not intended to provide professional advice. Obtain advice from appropriate professionals to deal with any particular financial matters.