Glossary

This page collects the consumer-banking vocabulary used throughout the site. Each entry gives a short definition in plain English, an example where one helps, and links to the article on this site where the term is treated at length. Acronyms are listed at the position of their expansion (for example, APY appears under Annual Percentage Yield) but cross-linked from the acronym. Where a term has a precise regulatory meaning that differs from common usage, we use the regulatory meaning and flag the divergence.

The site's regulations index is the companion to this page; where a definition rests on a specific rule, the entry links to the rule.

A

ACH (Automated Clearing House)

The U.S. batch-payment network used for direct deposit of payroll, recurring bills, account-to-account transfers, and most business-to-business payments that do not need to be instant. ACH is operated by the Federal Reserve and The Clearing House under a private rulebook administered by Nacha. See ACH, end to end.

Adverse action

Under the Equal Credit Opportunity Act and the Fair Credit Reporting Act, a denial of credit, a counter-offer with materially less favorable terms, or an account termination. Triggers a written notice within 30 days stating the specific reasons. Defined at 12 CFR §1002.2.

Agency

In retail-banking law, one of the federal regulators: FDIC, OCC, Federal Reserve, NCUA, CFPB, Treasury (including OFAC and FinCEN). Each has a defined jurisdiction; the same bank typically answers to more than one.

AML (Anti-Money Laundering)

The set of obligations imposed on financial institutions by the Bank Secrecy Act and its implementing regulations to prevent the financial system from being used to launder the proceeds of crime. Includes KYC, transaction monitoring, SAR filing, and OFAC sanctions screening. See BSA.

APR (Annual Percentage Rate)

The cost of credit, expressed as a yearly rate. Under Regulation Z, APR includes interest plus most fees that are a condition of getting the loan; for credit cards, the periodic rate is multiplied by twelve to produce the disclosed APR. APR does not reflect compounding within the year. See APR versus APY.

APY (Annual Percentage Yield)

The interest rate on a deposit account, expressed as a yearly rate that does reflect intra-year compounding. Required by Regulation DD; calculated under a formula in Appendix A to 12 CFR Part 1030. Example: a stated 5% nominal rate compounded daily produces an APY of about 5.13%.

ATM (Automated Teller Machine)

A self-service device that allows withdrawals, deposits, balance inquiries, and (sometimes) transfers, by reading a debit or ATM card. ATM transactions on a consumer account are subject to Regulation E.

Authorization (card)

The first step in a card transaction: the issuer's response to the merchant's request, confirming (or refusing) that the cardholder has the available credit or balance and that the card is not blocked. Authorization places a hold on the funds but does not move money. See what happens when you swipe a card.

Available balance

The portion of a deposit account that the bank will allow the customer to withdraw or spend at a given moment. Differs from ledger balance because of pending authorizations, holds, and uncollected deposits.

B

Bank

In U.S. usage, a depository institution chartered to take deposits and make loans, supervised by a state regulator or the OCC and (in nearly all consumer-facing cases) insured by the FDIC. The legal definition turns on charter, not branding; an entity advertising "banking services" is not necessarily a bank.

Banking-as-a-service (BaaS)

An arrangement in which a chartered bank provides regulated capabilities — deposits, payments rails, card issuance — to a third-party brand, typically through a middleware platform. The customer sees the third-party brand; the legal account-holder relationship runs to the bank. See banking-as-a-service.

Beneficial owner

The natural person who ultimately owns or controls a legal-entity customer. Under FinCEN's beneficial-ownership rule, banks must identify and verify beneficial owners of legal-entity customers above defined thresholds at account opening.

BIC

Bank Identifier Code; an 8- or 11-character SWIFT code identifying a financial institution in cross-border payment messages. Used together with the recipient's account number (or IBAN, where applicable) to route an international wire.

BSA (Bank Secrecy Act)

The federal anti-money-laundering statute (31 U.S.C. §5311 et seq.), substantially expanded by the USA PATRIOT Act and the Anti-Money Laundering Act of 2020. Implemented at 31 CFR Chapter X by FinCEN. See BSA framework.

Branch

A physical office of a chartered bank, distinct from a holding-company office or a non-bank affiliate. Each branch is the bank, legally; deposits at any branch are deposits at the bank for FDIC-insurance purposes.

Business day (Regulation CC)

For funds-availability purposes, any day other than a Saturday, Sunday, or federal holiday. A "banking day" is a business day on which the bank is open for substantially all of its banking functions; the two definitions matter when counting hold periods.

C

Cashier's check

A check drawn by a bank on its own funds, signed by an officer. Treated as a guaranteed instrument and subject to next-day availability under Regulation CC, with limited exceptions. Subject to forgery and counterfeit risk; a deposited cashier's check can still be returned if it is fake. See how checks clear.

CD (Certificate of Deposit)

A time deposit with a fixed term and (usually) a fixed rate. Early withdrawal triggers a penalty disclosed at account opening. See certificates of deposit.

Chargeback

A reversal of a card transaction initiated by the cardholder through the issuer and processed through the network's dispute system. Operates under network rules (Visa, Mastercard, Discover, American Express), distinct from but interacting with the consumer's legal rights under the Fair Credit Billing Act (credit cards) and Regulation E (debit cards). See disputing a fraudulent transaction.

Charge-off

An accounting entry by which a creditor moves a delinquent debt off the active receivables ledger, typically after 120–180 days of nonpayment. The debt remains owed; "charge-off" is not "forgiveness." Reported to credit bureaus as a derogatory event for up to seven years from the original delinquency. Compare write-off.

Check 21

The Check Clearing for the 21st Century Act, effective 2004, which gave legal equivalence to a "substitute check" — a paper reproduction of a digital image — and enabled the conversion of check clearing from paper transport to image exchange. See Check 21.

ChexSystems

A specialty consumer reporting agency operated by Fidelity National Information Services that maintains deposit-account history — closures for cause, unpaid overdrafts, suspected fraud. Banks check ChexSystems on account-opening; a negative report can result in denial. Subject to the Fair Credit Reporting Act; consumers have dispute and free-report rights. See ChexSystems and being denied an account.

CHIPS

The Clearing House Interbank Payments System; the privately operated U.S. large-value, dollar-denominated payment system used primarily for international wires. Settles on a netted basis; finality is final. Compare Fedwire.

Clearing

The exchange of payment information between banks and the calculation of net positions to be settled. Distinct from settlement, which is the actual movement of funds.

Collected balance

The portion of a deposit account against which the depositary bank has received final funds from the paying bank. A deposited check can be available before it is collected; if it is later returned, the credit is reversed.

Correspondent banking

The relationship by which one bank holds an account at another bank, typically in another country, in order to make and receive payments in that country's currency. The structural backbone of international wires before — and to a large extent after — the rise of alternative rails.

CRA (Community Reinvestment Act)

The federal statute requiring insured banks to help meet the credit needs of the communities they serve, including low- and moderate-income neighborhoods. Implemented through the interagency Regulation BB (with parallel parts at the OCC, Fed, and FDIC). See Reg BB.

Credit bureau

A consumer reporting agency. The three "nationwide" bureaus are Equifax, Experian, and TransUnion; the FCRA defines a broader class of specialty bureaus that includes ChexSystems, LexisNexis, and Early Warning Services. See how credit scoring works.

Credit union

A member-owned, not-for-profit depository cooperative chartered by the NCUA (federal credit unions) or a state credit-union regulator. Functions much like a bank from a depositor's standpoint, but ownership and governance are cooperative; deposits are called "shares" and insurance is provided by the National Credit Union Share Insurance Fund. See NCUA share insurance.

CTR (Currency Transaction Report)

FinCEN Form 112; filed by a bank for any cash transaction (or aggregated same-day cash transactions by the same customer) above $10,000. Filed automatically; not an accusation of wrongdoing.

D

Debit card

A card linked to a deposit account; transactions debit the account in real time (or shortly after authorization). Subject to Regulation E. Issuers above $10 billion in assets are subject to the Reg II interchange cap.

Demand deposit

A deposit payable on demand without notice — i.e., the funds in a typical checking account. Distinct from a time deposit (a CD) and historically distinct from a savings deposit, though the practical differences have narrowed.

Direct deposit

An ACH credit, typically of payroll or federal benefits, delivered straight into a designated deposit account.

Discount window

The Federal Reserve's standing facility for collateralized loans to depository institutions. The primary credit rate is the standard discount window rate. Use carries a stigma despite the Federal Reserve's efforts to reduce it.

Dormancy

The state of an account on which there has been no customer-initiated activity for a defined period (varies by state). Typically triggers a dormancy fee at the bank's threshold and, after a longer period set by state unclaimed-property law, escheatment to the state.

E

ECOA (Equal Credit Opportunity Act)

The federal anti-discrimination statute for credit; implemented by Regulation B at 12 CFR Part 1002. See ECOA.

EFAA (Expedited Funds Availability Act)

The federal statute behind Regulation CC; sets the maximum holds a bank may place on a deposit.

EFTA (Electronic Fund Transfer Act)

The federal statute behind Regulation E; the source of consumer rights in electronic transfers.

Encryption

Not strictly a banking term, but central to electronic banking security. Transport-layer security (TLS) protects data in transit between the consumer and the bank; at-rest encryption protects data stored by the bank. Required by the Gramm-Leach-Bliley Safeguards framework.

Escheatment

The legal process by which unclaimed property — including dormant deposit accounts — is transferred from the bank to the state. Governed by state unclaimed-property statutes, with timelines varying by state and instrument.

Escrow

An account held by a third party (often the mortgage servicer) into which a borrower pays an amount each month for property taxes, homeowners insurance, and (where applicable) mortgage insurance. Disbursed by the servicer when the bills come due. Governed by RESPA and Regulation X.

F

FCRA (Fair Credit Reporting Act)

The federal statute governing consumer reporting agencies; implemented by Regulation V at 12 CFR Part 1022. Source of dispute and accuracy rights. See FCRA.

FDIC (Federal Deposit Insurance Corporation)

The federal agency that insures deposits at insured banks and savings associations, supervises state-chartered banks that are not Fed members, and resolves failed banks. See FDIC deposit insurance.

Federal funds rate

The rate at which depository institutions lend reserve balances to one another overnight. The FOMC sets a target range; the effective federal funds rate is a transaction-weighted median of actual trades. Indirectly anchors other short-term rates.

FedNow

The Federal Reserve's instant-payment service, launched in July 2023. Operates 24/7/365 with immediate settlement and final, irrevocable transfers. Compare RTP. See real-time payments.

Fedwire

The Federal Reserve's real-time gross settlement system for large-value, time-critical payments. Funds move and settle in central-bank money; transfers are final and irrevocable on receipt. See wire transfers.

FICO score

A family of consumer credit scores produced by Fair Isaac Corporation, derived from data in a credit bureau file. Generally ranges from 300 to 850. The most widely used score family in U.S. consumer credit decisions; VantageScore is the principal alternative.

FinCEN (Financial Crimes Enforcement Network)

The Treasury bureau that administers the Bank Secrecy Act, collects SARs and CTRs, and runs the beneficial-ownership registry. Issues regulations at 31 CFR Chapter X.

FOMC (Federal Open Market Committee)

The Federal Reserve's monetary-policy committee: the seven Board governors plus five reserve-bank presidents on rotation. Sets the target federal funds range and directs open-market operations.

Float

Money that has been debited from one account but not yet credited to another, owing to the time taken to clear. A traditional source of bank revenue, largely eliminated for retail consumers by Check 21 and electronic payments, but still meaningful in some commercial contexts.

G

Garnishment

A legal process by which a creditor reaches funds held by a third party (such as a bank) that belong to the debtor. Subject to federal benefit-protection rules at 31 CFR Part 212 and state exemption statutes. See garnishment and account levies.

GLBA (Gramm-Leach-Bliley Act)

The 1999 statute that repealed Glass-Steagall's separation of commercial and investment banking and, in Title V, established privacy notice and safeguards requirements for financial institutions. See GLBA privacy.

Grace period (credit card)

The interval between the close of a billing cycle and the payment due date during which no interest accrues on new purchases, provided the prior balance was paid in full. Defined indirectly by Regulation Z's prohibitions on retroactive rate application; not legally required, but offered by most general-purpose cards.

H

Hard pull (hard inquiry)

A credit-bureau inquiry initiated as part of a credit application. Visible to other creditors and counted by scoring models; a small score effect that fades within 12 months. Compare soft pull.

HELOC (Home Equity Line of Credit)

A revolving credit line secured by a second lien (in most cases) on the borrower's home. Typically structured with a draw period followed by a repayment period; rates are commonly variable. See HELOCs and home equity loans.

Hold

A restriction on access to funds in an account. May be a Reg CC funds-availability hold on a deposit, a card-authorization hold on a portion of the balance, a fraud hold pending investigation, a garnishment hold, or an administrative hold.

I

IBAN

International Bank Account Number; a standardized format for account identifiers used in much of the world but not in the United States. A U.S. bank does not have an IBAN; cross-border wires to U.S. accounts use the bank's routing number or BIC plus the account number.

Interchange

The fee paid by the merchant's acquiring bank to the cardholder's issuing bank on each card transaction, set by the card network and forming the largest single component of merchant card fees. Capped on regulated-issuer debit transactions by Regulation II. See what happens when you swipe a card.

IORB (Interest on Reserve Balances)

The rate paid by the Federal Reserve on reserve balances held by depository institutions. Since 2008, IORB has been the Fed's main tool for steering short-term rates. Effectively a floor on overnight money-market rates.

IRA (Individual Retirement Account)

A tax-advantaged retirement account established by the Employee Retirement Income Security Act and amended many times since. At a bank, an IRA typically holds deposits or CDs; the tax wrapper does not change FDIC coverage. See IRAs at a bank.

J

JTWROS (Joint Tenants with Right of Survivorship)

A joint-account form in which, on the death of one tenant, the surviving tenant(s) take the entire account without probate. The most common joint-account form for spouses; FDIC coverage rules treat each co-owner as having equal interest unless the account record states otherwise. See joint accounts.

Jumbo loan

A residential mortgage above the conforming loan limit set by the Federal Housing Finance Agency. Ineligible for purchase by Fannie Mae or Freddie Mac; held on lender balance sheets or sold into private channels.

K

KYC (Know Your Customer)

The set of customer-identification and verification practices required by the BSA's Customer Identification Program rule and related regulations. A bank must verify the identity of each customer at account opening using government-issued ID or equivalent.

L

Ledger balance

The bank's record of the deposit balance at the close of the prior business day, reflecting all posted transactions. Distinct from the available balance, which subtracts pending holds and authorizations.

Levy

The seizure of property to satisfy a tax debt. Federal tax levies on bank accounts are made under 26 U.S.C. §6331; the bank holds the funds for 21 days before remitting them to the IRS, giving the account-holder an opportunity to assert exemptions or resolve the debt. See garnishment and account levies.

Lien

A security interest in property granted to a creditor as collateral for a debt. Recorded against the property (or, in personal-property contexts, by a UCC-1 filing). A first lien sits ahead of a second lien in priority on foreclosure.

LTV (Loan-to-Value)

The ratio of a loan balance to the appraised value of the collateral. A central underwriting metric for mortgages, HELOCs, and auto loans; pricing and insurance requirements (e.g., private mortgage insurance above 80% LTV on conforming mortgages) turn on it.

M

MMDA (Money Market Deposit Account)

A type of deposit account that pays a tiered interest rate and historically had a limited number of permissible third-party transfers per month under Reg D (relaxed in 2020). FDIC-insured. Not the same as a money market mutual fund. See money market deposit accounts.

Money market mutual fund

An investment fund — not a deposit — registered under the Investment Company Act, invested in short-duration debt instruments. Not FDIC-insured; subject to SEC Rule 2a-7. Frequently confused with an MMDA; the differences are structural and consequential.

Mortgage

A loan secured by a lien on real property. In U.S. practice, the term is used loosely for the entire residential-loan product, including the underlying note, the security instrument, the disclosures, and the servicing relationship. See mortgages: the basics.

N

Nacha

The trade association that administers the ACH network's private rulebook. Originally the National Automated Clearing House Association; now uses the short name. Not a federal agency, but its rules function as binding on participating institutions.

NCUA (National Credit Union Administration)

The federal agency that charters and supervises federal credit unions and administers the National Credit Union Share Insurance Fund. See NCUA share insurance.

Neobank

A consumer brand that offers banking-like services through a mobile or web interface, typically without holding its own banking charter. The actual deposit relationship runs to a partner bank under a sponsor-bank or BaaS arrangement. See challenger banks and neobanks.

Net interest margin

The difference between the interest income a bank earns on assets (loans, securities) and the interest it pays on liabilities (deposits, borrowings), divided by average earning assets. The core profitability metric for a traditional retail bank.

NSF (Non-Sufficient Funds)

A status applied when a presented payment exceeds the account's available balance and the bank returns the payment unpaid (rather than paying it and creating an overdraft). Historically charged a "returned-item fee"; many large banks eliminated these fees between 2022 and 2024.

O

OCC (Office of the Comptroller of the Currency)

The federal agency that charters and supervises national banks and federal savings associations. A bureau of the Treasury Department. See the OCC, state regulators, and chartering.

ODFI (Originating Depository Financial Institution)

The bank that introduces an ACH entry into the network on behalf of an originator. Makes a series of warranties to the receiving bank under the Nacha rules; bears the risk of return.

OFAC (Office of Foreign Assets Control)

The Treasury bureau that administers U.S. economic sanctions. Maintains the SDN list and others against which financial institutions screen. See OFAC sanctions.

ON RRP (Overnight Reverse Repurchase Agreement)

A Federal Reserve operation in which the Fed sells securities to eligible money-market counterparties overnight and repurchases them the next day at a slightly higher price. The rate sets a soft floor under money-market rates. A tool, not a target.

Open banking

The umbrella term for regulated, consumer-authorized data sharing between financial institutions and authorized third parties. In the U.S., implemented through the CFPB's Personal Financial Data Rights rule under Section 1033 of Dodd-Frank. See open banking in the U.S..

Overdraft

The state of an account with a negative balance after the bank pays a presented item that exceeds the available balance. Effectively a short-term unsecured loan from the bank; typically carries a per-item fee. Opt-in is required for one-time debit-card and ATM transactions under Regulation E. See overdraft and overdraft protection.

P

POD (Payable on Death)

A beneficiary designation on a deposit account that transfers the account to the named beneficiary on the account-holder's death, outside probate. Subject to the bank's documentation rules and FDIC's revocable-trust insurance category. See accounts after a death.

Prime rate

An interest-rate benchmark published by banks individually and aggregated by the Wall Street Journal; equal to the Federal funds target upper bound plus 3 percentage points since the mid-1990s, in effect. Used as a base rate for credit-card and HELOC variable rates.

Provisional credit

A temporary credit a bank posts to a consumer account when an error-resolution investigation under Regulation E will take longer than ten business days. Becomes permanent if the bank confirms the error; may be reversed (with notice) if the bank concludes no error occurred.

R

RDFI (Receiving Depository Financial Institution)

The bank that receives an ACH entry and posts it to the receiver's account. Has limited ability to refuse a properly formatted entry but can return it under defined return codes.

Regulation B

The CFPB's regulation implementing the Equal Credit Opportunity Act. See Reg B.

Regulation CC

The Federal Reserve and CFPB's regulation on funds availability and check collection. See Reg CC and the article.

Regulation D

The Federal Reserve's reserve-requirement and deposit-classification regulation. See Reg D.

Regulation DD

The CFPB's regulation implementing the Truth in Savings Act. See Reg DD.

Regulation E

The CFPB's regulation implementing the Electronic Fund Transfer Act. See Reg E and the article.

Regulation P

The CFPB's regulation implementing the GLBA privacy provisions. See Reg P.

Regulation V

The CFPB's regulation implementing the Fair Credit Reporting Act. See Reg V.

Regulation Z

The CFPB's regulation implementing the Truth in Lending Act. See Reg Z.

Repurchase agreement (repo)

A sale of securities with an agreement to repurchase them at a higher price on a defined date. Economically a collateralized loan. Used by the Fed (in reverse) as a monetary-policy tool and by money-market participants for short-term funding.

Rescission (mortgage)

The borrower's three-business-day right under TILA to cancel certain mortgage transactions secured by a principal dwelling. Does not apply to purchase-money mortgages or to refinancings with the same creditor; does apply to most HELOCs and cash-out refinancings.

Reserve

A balance held by a depository institution at a Federal Reserve Bank or as vault cash. Reserve requirements (the proportion that must be held against transaction accounts) have been set to zero since March 2020; reserves are still held, both as a buffer and to earn IORB.

Routing number (ABA RTN)

A nine-digit identifier assigned to U.S. financial institutions for the routing of checks, ACH, and Fedwire transfers. The first four digits are a Federal Reserve routing symbol; the last digit is a check digit.

RTP (Real-Time Payments)

The Clearing House's instant-payment service, launched in November 2017. Operates 24/7/365; transfers are final and irrevocable on receipt. Compare FedNow. See real-time payments.

S

SAR (Suspicious Activity Report)

A confidential report filed by a financial institution with FinCEN under the BSA when a transaction (above a defined threshold) raises specified concerns. The bank is prohibited by law from telling the customer that a SAR has been filed.

Secured (loan or card)

Backed by collateral that the lender may seize on default. A secured credit card is backed by a deposit; a mortgage by the home; an auto loan by the vehicle. Compare unsecured.

Secured credit card

A credit card whose available credit is collateralized by a refundable cash deposit held by the issuer. Typically used to establish or rebuild credit history; reports to bureaus like any other credit card.

Settlement

The actual movement of funds between banks to satisfy an obligation created by a payment instruction. Distinct from clearing.

Signature card

The legal document a customer signs at account opening that establishes the contract with the bank, the authorized signers, the ownership form, and (often) beneficiary designations. Increasingly digital, but conceptually unchanged.

Soft pull (soft inquiry)

A credit-bureau inquiry that does not affect the consumer's score and is not visible to other creditors. Used for prequalification, account review, and consumer-initiated self-checks. Compare hard pull.

Stop payment

A customer instruction to the bank not to pay a specific check or ACH item. Subject to a fee in most fee schedules; for ACH, the right is governed by Regulation E (for consumers) and the Nacha rules.

Sweep account

An arrangement by which funds above a threshold in one account are automatically transferred (swept) into another account or vehicle — often a money market mutual fund, sometimes among partner banks to extend FDIC coverage. Insurance treatment depends on the destination.

SWIFT

The Society for Worldwide Interbank Financial Telecommunication; a Belgium-based cooperative that operates a messaging network used for cross-border payment instructions among banks. SWIFT moves messages, not money. See international transfers and SWIFT.

T

TILA

Truth in Lending Act. See TILA.

Time deposit

A deposit with a fixed term and (typically) a fixed rate. A CD is the most common consumer time deposit.

TISA

Truth in Savings Act. See TISA.

U

Unsecured

Not backed by collateral. The lender's recourse on default is to sue the borrower personally; recovery depends on the borrower's other assets. Credit cards and personal loans are typically unsecured. Compare secured.

UTMA / UGMA

Uniform Transfers to Minors Act / Uniform Gifts to Minors Act; state statutes establishing a form of custodial account for minors. The custodian manages the account in the minor's interest; control transfers at the age of majority defined by state law. See custodial accounts.

V

VantageScore

A consumer credit-score family produced by a joint venture of Equifax, Experian, and TransUnion. Scoring scale aligned with FICO (300–850). Used by some lenders and many consumer-facing credit-monitoring products; less common in mortgage underwriting.

W

Wire transfer

A real-time, gross-settlement payment between bank accounts, executed through Fedwire (domestic) or CHIPS / SWIFT-correspondent rails (international). Final and irrevocable on receipt; not subject to the consumer-friendly reversibility of card or ACH transactions, which is why wire fraud is so often unrecoverable. See wire transfers.

Write-off

An accounting entry by which a creditor removes a fully uncollectible debt from its balance sheet. Distinct from charge-off, although often used interchangeably; the debt may still be sold to a third-party collector.

Limits and uncertainty

This glossary covers terms used elsewhere on the site plus the common acronyms a reader is likely to arrive looking for. It is not a substitute for the article on each topic, which gives the legal authority and the operational detail behind the definition. Definitions are kept in plain English at the cost of some precision; where a regulation gives a precise meaning that the entry summarizes, follow the link in the entry to the article and from there to the regulation. Terms that have specialized meanings only in commercial or investment banking — outside this site's retail scope — are omitted.