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# Glossary of Banking and Credit Terms

Be familiar with these basic banking and credit terms. Knowing and understanding the terms that are on your bank and credit card statements can possibly save you dollars every month.

- Account Reconciliation - The act of confirming that the balance in one's checkbook register matches the corresponding bank statement.
- Adjusted Balance method - A technique for calculating finance charges (such as in a bank account, charge account, or credit card account) based on the account balance remaining after adjustments are made for payments and credits during the billing period. Interest charges are usually lower under this method than under other methods, such as average daily balance and previous balance methods.
- Automated Teller Machine (ATM) - A machine at a bank branch or other location which enables a customer to perform basic banking activities (checking one's balance, withdrawing or transferring funds) even when the bank is closed.
- Automated Clearing House (ACH) - A nationwide electronic funds transfer network which enables participating financial institutions to distribute electronic credit and debit entries to bank accounts and to settle such entries.
- Average Daily Balance method - A technique for calculating finance charges (such as in a bank account, charge account, or credit card account) based on average balance that existed each day. Interest charges under this method are usually higher than the adjusted balance method but lower than the previous balance method.
- Balance -The amount of money in an account, equal to the net of credits and debits at that point in time for that account.
- Bank Credit - The borrowing capacity provided to an individual by the banking system, in the form of credit or a loan. The total bank credit the individual has is the sum of the borrowing capacity each lender bank provides to the individual.
- Bounced Check - A check which a bank returns because it is not payable due to insufficient funds.
- Cash Reserves - Cash deposits, short-term bank deposits, money market instruments, and Treasury bills.
- Certificate of Deposit - A short- or medium-term, interest-bearing, FDIC-insured debt instrument offered by banks and savings and loans. CDs offer higher rates of return than most comparable investments, in exchange for tying up invested money for the duration of the certificate's maturity. Money removed before maturity is subject to a penalty. CDs are low risk, low return investments, and are also known as "time deposits", because the account holder has agreed to keep the money in the account for a specified amount of time, anywhere from three months to six years or more.
- Certified Check - A check for which the bank guarantees payment.
- Check - A negotiable instrument drawn against deposited funds, to pay a specified amount of money to a specific person upon demand.
- Checkbook Register - An informal record of all deposits to and withdrawals from a given checking account. A checkbook register is used to perform account reconciliation.

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