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Did you know there are over 4,700 different banks in the United States? That’s a lot of banks! We all need to go to the bank every once in a while, but do you understand common banking terminology?
Understanding basic banking and finance can make a big difference in your bank balance. It’s crucial for all adults to know several key banking concepts. Keep reading this article to discover the essential banking terms everyone should know.
A deposit is a sum of money that is put into the bank to save and grown interest. In order to start banking, you will need to start with a deposit. As you acquire more money you will need to continually deposit your paychecks into your bank account.
2. Checking Account
A checking account is a bank account that you can deposit money into and use for purchases and writing checks. This account is commonly where people deposit their paychecks and use them to pay their bills. You can access a checking account’s money through checks, a debit card, in the bank, at an atm, or through an online portal.
3. Savings Account
Your savings account is the account where you typically place money to grow and gain interest. This account is used to hold money for savings goals like buying a house or a new piece of furniture. This account is also used for an emergency fund for unexpected expenses such as a car repair.
4. Cash Flow
What is cash flow? Cash flow is the money in and the money out of your account. For banking terms, this can also be related to your liquidity.
5. Overdraft Fee
An overdraft fee is a penalty for overdrawing your bank account. This means you tried to pay for something that equated to more money than you had in the bank. Your bank will pay the difference, but you will then have a negative balance in your bank account.
6. Routing Number
A routing number is a number assigned to your bank in order to identify the financial institution. You will use a routing number to set up direct deposits in your bank account or other wire transfers.
7. Bank Transaction
A bank transaction is the record of the money that has been moved into and out of your bank account. This is important to monitor to avoid fraud and keep a budget.
APR is the annual percentage rate. This means the amount of interest you get for keeping money in your account for over a year. This does not include compound interest.
9. Compound Interest
Compound interest is the interest that applies to the original deposit as well as any newly earned interest.
APY is the annual percentage yield. This means the amount of interest you get for keeping money in your account for over a year. This does include compound interest.
Know Your Banking Terms
Now that you know the top 10 banking terms every adult should know, it’s time to step up your banking game.
If you enjoyed this article be sure to check out others on the website for more important life knowledge.