Personal Finance: Banks

Credit Union vs. a Bank

One key difference is that a credit union is a not-for-profit institution. Since credit unions operate as nonprofits, they can offer higher interest rates on savings accounts and CDs, and lower interest rates on loan products and credit cards. Another important distinction is that credit unions are member-focused institutions. A credit union is a cooperative, which means it is owned and operated by its members, as opposed to being owned by its stockholders like a bank. Your initial membership deposit makes you a part owner of the credit union and gives you a say in the credit union's decisions.

Annuity

a contract between you and insurance or investment company in which you make a lump sum payment or series of payments and in return obtain regular disbursements beginning either immediately or at some point in the future. The goal of annuities is to provide a steady stream of income during retirement. Funds accrue on a tax-deferred basis, and like 401(k) contributions, can only be withdrawn without penalty after a certain age.

Mortgages

a loan to finance the purchase of a home. It is likely the largest debt you'll ever take on. It is made up of several parts - the collateral you used to secure the loan, your principal and interest payments, taxes and insurance. Most mortgages consist of 15 to 30 years of monthly payments.

Overdraft Protection

a service offered by banks that allows checking account holders to temporarily make purchases with a debit card even if they don't have sufficient funds in their account to cover them.

Money market

a type of savings account that usually earns a higher amount of interest than a basic savings account. The minimum balance for this account is often considerably higher than the minimum balance of a basic savings account and limits are placed on the number of so-called convenient transactions per year

Car Loan

a way for you to purchase a new or used vehicle. You borrow money from a lender and pay them back over time, usually with interest. The amount you borrow is called the loan principal Car loans almost always include interest, which is how lenders make a profit on the money they lend.

ATM (Automated Teller Machine)

an electronic banking outlet, which allows customers to complete basic transactions without the aid of a branch representative or teller

Compound interest

interest that is based on the previous year (includes the interest from the year before)

FDIC

is a US gov't corporation created by the Glass-Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. The FDIC also examines and supervises certain financial institutions for safety and soundness, performs certain consumer-protection functions, and manages failed banks.

Personal Identification Number (PIN)

is a numeric password used to authenticate a user to a system, in particular in association with an ATM card Note: you have 60 days from the date a periodic statement containing a problem or error was sent to you to notify your financial institution. Once you've notified the financial institution about an error on your statement, it has 10 business days to investigate. Results within 3 business days after competition and correction within one business day

CD

is a time deposit, a financial product commonly sold in the US and elsewhere by banks, thrift institutions, and credit unions. CDs are similar to savings accounts in that they are insured and thus virtually risk free; they are "money in the bank"

Savings Account

one of the simplest types of bank accounts available to consumers. It lets you store cash securely with an insured bank or credit union and earn returns on the balance

Electronic Fund Transfers (EFT)

the use of computer and electronic technology in place of checks and other paper transactions. EFTs are initiated through devices like cards or codes that let you, or those you authorize, access your account.

Bouncing a check

when there are insufficient funds in an account, the bank will "bounce the check" (refuse to honor it). Banks and vendors frequently charge fees for bounced checks, sometimes exceeding the amount for which the check was written.

Debit Card

A payment card that deducts money directly from a consumer's checking account to pay for a purchase. Debit cards elimante the need to carry cash or physical checks to make purchases. In addition, debit cards, also called check cards, offer the convenience of credit cards and many of the same consumer protections when issued by major payment processors like VISA or MasterCard. Unlike credit cards, they do not allow the user to go into debt. Note:If your credit card is lost of stolen, you can't lose more than $50. If someone uses your ATM or debit card without your permission, you can lose much more

Checking Account

A transactional deposit account held at a financial institution that allows for withdrawals and deposits. Money held in a checking account is very liquid, and can be withdrawn using checks, automated cash machines and electronic debits, among other methods

Credit Union

Credit unions are similar to traditional banks in the sense that both institutions offer financial products to customers. Credit union members, like bank customers, have access to checking and savings amounts, CDs, loan products, and credit cards.

Electronic Banking

For many people, electronic banking means 24-hour access to cash through an ATM or direct deposit of paychecks into checking or savings accounts. But electronic banking involves many different types of transactions, rights, responsibilities - and sometimes, fees.

Overdrawing

If you try to use your debit card when there is not enough money in your account to cover the transaction and your account does not allow overdrawing, the transaction will be declined. No fee is charged. If your account allows overdrawing, you can be charged a fee ($10-$35), like with a check.

simple interest

Interest on the original investment over and over again