Banking and Financial Systems Chapter 9

ABA routing number

a nine-digit number assigned by the American Bankers Association (ABA) to identify the financial institution responsible for paying the value of a check to the payee

check

A written order directing a bank to pay a specific amount from deposited funds

wire transfer

An electronic transfer of funds from one location to another location

substitute check

. A paper copy of the front and back of the original check

third-party endorsement

. An endorsement that transfers the payee's claim to the check's value to a third party.

payee.

. The entity receiving the money

debit card

A card that enables customers to electronically access the funds in their accounts at an ATM or to pay for goods and services in stores or online

cancelled check

A check that has been cleared

Automated Teller Machine (ATM)

A computerized machine that provides a means of self-service banking; allows a customer to perform basic banking activities, such as withdrawing cash, viewing account balances, initiating cash advances, and making deposits

on demand.

A payment made when requested.

cash card

A plastic card with a magnetic strip that can be read by an ATM

restricted endorsement.

An endorsement with added limitations on what can be done with the check when it is presented to a bank.

promissory note.

An unconditional promise to repay a loan for a specific amount of money in the future or on demand.

image replacement document (IRD)

Another term for a substitute check, usually an electronic copy

electronic funds transfer (EFT).

Any exchange of money from one account to another through computer-based systems that is started by electronic means.

Automated Clearing House (ACH)

Electronic network for financial transactions that processes credit and debit transactions, processes checks, and transfers funds between banks

bill-payment service

Electronic transfer of funds from a customer's account to a vendor's account that is requested by the customer or the vendor each time a payment is due

direct deposit.

Funds that are added directly into a bank account by electronic means instead of with a negotiable instrument.

Automatic Payment

Preauthorized electronic funds sent from a customer's account to a vendor's account at regular intervals

clearing

The process of approving a check and transferring funds from one account to another

endorsement.

The signature used to legally transfer the value of a check.