Clear Answers for Common Questions

A cashier's check is a financial certificate or note that people use in place of cash, regular checks, credit or other types of payment such as money orders. It has other names, including bank check, bank draft, teller’s check, treasurer’s check and official check. Although it functions ...

Money orders are financial certificates or notes used in place of cash in order to make a payment. They do not require the person getting them to have a bank or credit account, so they often are the go-to option when a person isn’t affiliated with a financial ...

A bank draft or banker's draft is a check that it guaranteed by the bank that issues it. In most cases, it lists the bank's main office or branch as the issuer, and the person or company that is receiving the money as the payee; the name of ...

Cash advances are essentially loans that are funded from the open balance in a credit card account or a line of credit. Many credit card providers include this feature as part of the services provided to customers. The maximum amount that can be borrowed and the frequency of the allowed ...

A check cashing service is a company that will cash a check for a fee. Banks also cash checks, and some do so at no cost to the consumer, especially if he or she has an account at the bank or uses direct deposit. Many people, particularly those without bank ...

There are several different types of bank accounts. Understanding them all can be difficult, as each banking institution may offer a broad range of account types. However, most accounts fall into one of five categories. By learning the different account categories, you can make deciphering the choices offered at your ...

A savings account typically refers to an account in which a person places money to earn a small amount of interest. Unlike a 401k or an IRA, the funds are usually easily accessible, though some banks do charge for withdrawing money early. In most cases, people can withdraw money from ...

Depending on how you open a bank account and what type of account you need, different materials may be required. At a minimum, you must provide proof of your age, address, and legal status, whether you open the account in person, on the phone, or on the Internet. Prepare to ...

A deposit slip is a printed form which accompanies bank deposits. The depositor fills out the slip to indicate what types of funds are being deposited and which accounts they should be deposited into. In some cases, a bank will pre-print forms with account information and include them in ...

When you use a bank card in a store, you are often offered the option of using it as a debit or credit card. The main difference is what network the transaction is processed through. It is important to remember that in either case, the funds are taken directly from ...

A certified check is a check issued by a bank that carries a guarantee of payment. To issue this type of check, a bank first withdraws the appropriate funds from the payer's account, and holds them internally until payee cashes the check, thereby guaranteeing that the funds will be ...

A wire transfer is an electronic transfer of money. In the case of a bank-to-bank transfer, no actual cash is exchanged, but electronic balances in the respective accounts are adjusted accordingly. This is a very secure way to transfer funds, as positive identification of both account holders is ...

A collateral loan is also called a secured loan. It is a loan obtained from a banking or other financial institution, where in exchange, the creditor may sell that which is offered for collateral if the loan is unpaid. A collateral loan is often offered at a lower interest rate ...

To understand money market accounts and funds, it helps to know the difference between the two, and to understand what the "money market" is to begin with. It is simply a generic name used to describe the market wherein banks and other financial institutions lend, borrow and trade money, Certificates ...

A letter of credit is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank is required to cover the ...

The plastic credit card with a magnetic strip many people carry in their wallets or purses is the end result of a complex banking process. Holders of a valid card have the authorization to purchase goods and services up to a predetermined amount, called a credit limit. The vendor receives ...

A bank card is a card issued by a bank and linked with a particular person's bank account. Bank cards are plastic with magnetized strips just like credit cards, but they work differently from credit cards, as they are linked to actual funds on deposit, rather than a line ...

A bank note is a promissory note issued by a bank. It is payable on demand, sometimes in the form of precious metals like gold and silver, and sometimes in exchange for assets such as bonds issued by the bank. Bank notes are considered legal tender, and they are used ...

An ATM (Automatic or Automated Teller Machine) is a computerized machine designed to dispense cash to bank customers without need of human interaction. The ATM can also take deposits, transfer money between bank accounts and provide other basic financial services. Most banks feature one or more "on premises" ATMs so ...

Investment banking is a type of financial service that focuses on helping companies acquire funds and grow their portfolios. Much of this comes in the form of stock and bonds transfer, but investment capital and wholesale corporate acquisitions are also part of the equation. Bankers within this sector are usually ...

A cash for keys offer is a deal which a bank may make with a homeowner, in which the homeowner is given a cash settlement in exchange for vacating his or her foreclosed home. This type of arrangement is sometimes made to renters, too. The advantage, from the point of ...

A bounced check is a check which is returned by a bank because the check's author does not have sufficient funds on deposit. This colloquialism refers to the fact that the check is “bounced” back from the bank; such checks are also called “rubber checks.” In the United States ...

Check kiting is a form of fraud involving the sloshing of theoretical funds between two bank checking accounts. A check written to the criminal from one bank is deposited, and more importantly credited, to an account at a second bank. Because that second bank now shows a positive balance, the ...

Considering the number of checks written every day around the world, it's sometimes easy to forget that each one is a legally binding financial instrument. A paper or electronic check serves as a good faith token between parties, based on the trust that an equivalent amount of cash does ...

Day loans are short-term loans extended by banks to brokers. Sometimes referred to as a morning loan, the proceeds from the loan are used to purchase securities that are intended for delivery later in the day. Once the securities are received, they can then be pledged as collateral for ...

Just about everyone engages in some form of bank reconciliation. From households to big business, bank reconciliation is a part of sound financial management. Essentially, bank reconciliation is the act of taking documentation issued by the bank and comparing it to documents that are generated by the account holder, and ...

As anyone who has ever bounced a check can attest, the ability to balance a checkbook can be crucial. Banks do make mistakes occasionally, and checks may not clear your account as timely as you may have hoped. With the increased popularity of debit cards, forgetting a transaction or two ...

If the term "offshore bank account" conjures up images of fugitive billionaires and organized crime bosses, be prepared for a reality check. Generally speaking, any bank account opened outside of one's native country can be considered an offshore bank account. There is usually not much difference in service or ...

Banks hold checks for several reasons, all based on the need to ensure that the check will be honored by the bank on which it was drawn. This wait, sometimes called the "clearing period," prevents the funds from being used by the customer right away. When a person deposits a ...

A bank teller is a member of the staff of a bank who deals directly with the public and handles routine banking transactions like deposits, withdrawals, and so forth. For many people, bank tellers are iconic figures, since they represent the face of the bank to the public. Employment in ...

Wholesale banking is commonly defined as banking services that are provided between merchant banks and other types of financial institutions. The term is often used, however, to refer to the wide range of financial services that are provided by financial institutions to various corporations and businesses as well as to ...

Online banking is the practice of making bank transactions or paying bills via the Internet. Thanks to technology, and the Internet in particular, people no longer have to leave the house to shop, communicate, or even do their banking. Banking online allows a customer to make deposits, withdrawals, and pay ...

The Federal Reserve, or Fed is the central system of banking of the United States. It is owned both publicly and privately, and is comprised of a number of different branches, which work together to control the supply of money in the American economy and to set fiscal policy. The ...

In most countries, land is a hot commodity due to sprawling cities and commercial development. Open land is often consumed at a dizzying rate by cities and developers hungry for space to build more housing, retail and office space. In anticipation of future development, investors and city, county or state ...

A merchant bank deals with the commercial banking needs of international finance, long-term company loans, and stock underwriting. This type of bank does not have retail offices where a customer can go and open a savings or checking account. It is sometimes said to be a wholesale bank, or ...

Banks now make it possible for customers to do most of their banking online, paying credit cards, utilities, loans, mortgages, and even transferring money between accounts. Customers can save postage, paper, time and gasoline, and that’s just good business. But with fraud and identity theft on the rise, is ...

Direct deposit is a banking option that allows for the transfer of funds without the hassle associated with paper checks. It is very common in the United States. In fact, research that over 145 million Americans transfer funds in this way on a regular basis. Many businesses offer their employees ...

A checkbook generally consists of a supply of preprinted banking checks, a registry for recording payments and deposits, several deposit slips for incoming checks and currency, and a protective sleeve with a pocket for receipts. Many people carry a checkbook inside a purse or in addition to a wallet in ...

A certificate of deposit, also called a CD, is a type of savings certificate. A client deposits a certain amount of funds with a bank for a fixed period, usually from one to five years although longer terms are possible, and in return is guaranteed a locked interest rate which ...

Cleared funds are usually identified as cash, checks or other financial instruments that have been deposited into a bank or investment account, and have been cleared for usage by the institution. Depending on the regulations the govern deposits with the jurisdiction, as well as the standard practices of the financial ...

Opening a new checking account often comes with a practical perk: starter checks. These temporary checks are a bridge for new customers as they wait for personalized checks, with over 90% of banks offering them as a standard service.  Starter checks typically lack personal details but include essential routing ...

In many cases, when you bounce a check, it gets returned unpaid to the company or person who deposited it. In addition to the fee usually assessed by the recipient of the check, your bank may also assess a service charge to you for having written a bad check. If ...

Fractional-reserve banking is a form of banking in which banks are only required to keep a fraction of their total deposits on hand. Most banks around the world use this system, because fractional-reserve banking is what allows banks to generate funds. It's also what allows people to ...

The telegraphic transfer is a means of wiring funds from one location to another. Originally, this process made use of the telegraph as a means of transferring money between a point of origin and a point of termination. Today, the process of transferring money between two parties no longer involves ...

A canceled check is a check that has already drawn funds on the designated account. In a bank statement, a customer may receive either his original canceled checks showing that these checks have been paid or copies of each. Usually, the institution from which the money is drawn, a bank ...

A bank examiner has the task of making sure that properly chartered banks are operating legally, ethically, and within the requirements that made it possible for the bank to begin operations in the first place. In the United States, he or she is employed by the Federal Reserve Bank and ...

FDIC stands for Federal Deposit Insurance Corporation, an independent agency of the federal government that regulates more than 4,900 banks in the US, totaling an estimated $7 trillion US Dollars (USD) worth of deposits. The purpose of the corporation is to maintain public confidence in the banking system and ...

When you have a bank account, you can typically use any branch of your bank to make deposits, withdrawals or otherwise. The reason you’re able to do this is because all of the branches belonging to your bank, through computer communication, are essentially “wired” together and have access to ...

One of the banking services that businesses of all sizes may find useful is a lockbox service. Essentially, a lockbox is simply a post office box that your bank establishes for your business and that the bank will control. You are issued a remit to address that will allow your ...

The term loan to value, or LTV, applies primarily to the mortgage banking industry. It is an equation that mortgage lenders use to assess their risk in lending a borrower money to purchase property. The equation is basically a ratio of the amount of money being borrowed to the value ...

A mortgage banker is an entity, such as a company or a person, that originates and sells mortgage loans directly to a borrower. It sometimes services mortgage loans as well, but in most cases, this entity sells the loan to a secondary mortgage company soon after closing. Mortgage bankers are ...

Choosing a bank is an important decision. Many people would like to pick a single bank and stick with it for the rest of their lives, so it is a good idea to take time and think about your needs before choosing a bank. By establishing what you know you ...

Online banking is revolutionizing the banking industry, and there are different types of Internet banking programs from which to choose. Online checking and bill paying are two popular options. Many times, banks are able to provide free checking if you choose an online account, because there is less overhead involved ...

Many people are finding the ease and convenience of online banking to be very attractive. In response to its popularity, many standard banks which you can visit in your local town, offer online banking to customers. This gives customers the ability to see automatic changes in their account, pay bills ...

Commercial banks are banking institutions that are geared more toward the lending of money to customers, rather than focusing on generating or raising money. Such a bank accepts deposits to personal and corporate accounts, and then uses the combined strength of the deposits to finance loans for individuals and businesses ...

An investment bank is a financial firm which specializes in the sale and management of securities such as stocks and bonds, rather than just handling cash funds like a traditional bank. Investment banks and traditional banks are separated financially because they handle different type of economic transactions, and in the ...

A consumer bank is any bank that accepts deposits, offers services like making private loans to individuals, and allows you person-to-person contact at a specific location, called a branch. Essentially any bank you walk into to deposit your paycheck is a consumer bank. The term refers to the ...

A banking syndicate is a group of investors, often a set of investment banks, who have come together in order to function as an underwriting group for a specific project. Typically, a banking syndicate is not a permanent entity, although the banks involved may maintain a casual communication for the ...

Banking ethics are the moral or ethical principles that certain banks chose to abide by. There isn’t an ethics ombudsman or a universal code of ethical conduct, but the banks that vaunt their ethical credentials vet the ethical standing of potential investors and partners and also choose the companies ...

The time deposit is a common form of savings that place restrictions on when a depositor can withdraw funds from the investment. The two most common examples of it are the savings account and the Certificate of Deposit. A financial institution such as a bank, credit union, or a savings ...

Online bill pay is a way to utilize the Internet to pay bills, normally through banking online. This service is offered for free by many banks. Those that do require a fee usually provide the service for a nominal charge. Many will find the convenience and money saved in postage ...

The prime rate is the interest rate banks or lenders charge their most preferred and credit-worthy customers. Often, loan products like personal and automobile loans use the prime rate as a base rate. Credit cards and certain types of commercial financing may use the prime rate as a base ...

Bad debt can cover a wide variety of definitions. The most common meaning is money owed which is unlikely to be recovered. This form of bad debt may be written off by a company or may ultimately lead to the person with bad debt finding himself unable to gain anymore ...

In a world that operates with a number of different currencies around the world, there is a need for services that allow for the orderly conversion of one type of currency to another. This is where the concept of a currency exchange comes into being. Essentially, a currency exchange is ...

There are numerous advantages to checking accounts, and they certainly beat stowing money under the mattress, or in the mattress, as a safe means of storing money. You can get checking accounts from any bank, most credit unions, and most savings and loan companies. Frequently you don’t even need ...

In the United Kingdom, the LIBOR rate is an important reference rate that is based on the rates of interest currently applied to loans extended to other banks in the greater London money market. Properly known as the London Interbank Offered Rate, this reference on interest rates is utilized for ...

The call money market is a mechanism that allows both dealers and brokers to locate and borrow funds that can be used for investment needs. The funds located through the money market can be utilized to provide financing for the purchase of securities that can be added to the portfolio ...

Bank credit has to do with the amount of funds that an individual or a business may be able to borrow from one or more lending institutions. In effect, it is a measure of how much in the way of cash loans may be issued, based on the credit history ...

Sometimes referred to as FedWire, the Federal Reserve Wire Network is an example of a real-time gross settlement system. Essentially, this type of system allows for the timely processing of wire transfers between banking institutions that are part of the network. This allows for the transfer of funds immediately ...

Letting bills go unpaid after their due date is never a good idea. Not only do most companies add interest charges to bills after the due date, the longer a bill remains unpaid the less likely it is that it will be paid. The intention to pay may be there ...

A bank run is a situation in which depositors panic and withdraw their deposits simultaneously from a banking institution. The result of the massive drain on the bank's resources is often insolvency for the bank, ironically creating a situation in which a panic about insolvency creates an insolvency. When ...

Classified loans are bank loans that have been issued according to the terms and regulations of the bank, but later become somewhat suspect by the bank examiners. Often, this takes place when information that was not available at the time of issue is uncovered, or circumstances with the borrower undergo ...

Among the financial services that are offered with many banking institutions, there is the bank trust department. Essentially, the function of the department is to handle the administration of trust funds, provide estate planning support, and in some cases, see to the disposition of the estate of a deceased customer ...

More properly known as a business to consumer transaction, the B2C transaction is a model of buying and selling that takes place over the Internet. The scope of these types of transactions is very broad, ranging from retail purchases online to enhanced services such as online banking. Here is some ...

The bank rate is the interest rate which is used when a central bank such as the Federal Reserve System loans money to national banks. Changes in the bank rate have an impact on the amount of available money in a nation, and these rates are set by the central ...

A central bank or reserve bank is the organization within a specific country or coalition of countries that regulates all of the currency supplies and related policies for that particular area. Central banks perform various actions, but its most important job is to make certain that the national currency and ...

The Check Clearing for the 21st Century Act, or Check 21, was an act of American legislature that was passed on October 28, 2003, and took effect a year later. Check 21 changed the way in which payments by check are processed in the United States, and streamlined communication between ...

A distributing syndicate is a collection of investment banks that band together for the purpose of underwriting and acting as the distributor for a new offering of a given security. Sometime referred to as an underwriting group or investment banking syndicate, the member banks who are part of a distributing ...

Deposit multipliers are a strategy that is applied when it is necessary to identify the amount of money that is created in the money supply of a bank. The resulting figure helps to ensure that the bank is maintaining at least the minimum amount of funds on hand to comply ...

As numerous stand-up comedians have observed over the years, one of the least explainable developments in banking history is the addition of Braille on drive-up ATMs. Assuming the driver of the car would be the same person conducting the banking transaction, one does have to wonder why banks ...

A lender is any institution or individual who loans a borrower money. There are a number of types of lending organizations, including educational, commercial, hard money, lenders of last resort, and mutual organizations. The most traditional type is a commercial lender, which is often a banking institution, though it may ...

Commercial loans are bank loans that are granted to different types of business entities. In some cases, the loan is extended to assist a company with short term funding for basic operational functions, such as meeting payroll or purchasing supplies that are used in the production of the goods manufactured ...

Commercial lending is the process of loaning money to established entities, such as a business, partnership, or limited liability corporation. In some cases, it will take the form of a revolving line of credit that the business can utilize to handle operational costs and other types of working capital needs ...

Sometimes referred to as business credit or commercial lending, commercial credit has to do with the ability of a business to obtain goods and services from a supplier. Business credit is extended with the understanding that the business promises to pay the supplier according to the terms and conditions that ...

Consumer finance has to do with the lending process that occurs between the consumer and a lender. In some instances, the lender may be a bank or financial institution. At other times, the lender may be a business that offers in house credit in exchange for the business of the ...

A deposit in transit or DIT is money that you have deposited in your bank account, but that doesn’t show up yet as received or credited by the bank. There are a number of reasons why a deposit in transit may not show up yet on a bank statement ...

Piggy banks are traditionally ceramic containers shaped like a round pig with a slot in the top for change or occasionally paper money. Some piggy banks have a plug in the bottom allowing money to be retrieved, while others must be smashed for the money to be recovered. Piggy banks ...

The Automatic Clearing House is one of the central functions that make modern banking possible. As a network that allows for the orderly and timely transfer of funds between accounts open with different banking institutions, the ACH makes it possible for many people to access funds in their accounts much ...

A credit crunch is a term used in the banking industry to describe an economic state in which there is a decrease in loan availability. Usually occurring during a recession, a credit crunch indicates that banking institutions are unwilling to take on additional credit risk. Corporations as well as individual ...

The Clearing House Interbank Payments System, often referred to as CHIPS, is a transferal system that can be used to conduct financial transactions between different banks. The system is not to be confused with the Federal Reserve Wire Network, which is much larger and also is better suited for bank ...

The Internet has changed the way many of us lead our lives. We can shop, gain educational certificates and even work from home, online. Banks have also come up to date, and now we can process all our financial transactions on our computers, via an Internet bank. An Internet bank ...

While many people have an understanding of what is meant by a bank, a lesser number of persons will be acquainted with a bank company. Essentially, a bank company is defined as the business entity or group that actually owns one or more banks. A bank company may be set ...

One of the most convenient things about the Internet is the ability to pay bills online. Luckily, today’s websites make electronic bill paying as secure and safe as possible. Paying bills online saves time, paper, stamps and gasoline, and can also prevent the mistake of accidentally missing a payment ...

Uncollected funds are checks, money orders, and other financial instruments that have been deposited into a bank account, but have not yet been released by the issuing bank or institution. Typically, banks place some restrictions on the withdrawal of these funds for a period of time. However, some banks will ...

Bank discounts are an example of a bank charge that is made for payment of a note at some point prior to maturation. In some cases, the bank discount is applied at the time that the note or loan is extended, and is automatically deducted from the loan amount that ...

The Board of Governors is the organization at the head of the Federal Reserve banking system in the United States. The members of the board make important decisions about monetary policy that are intended to promote a healthy and growing American economy. They also oversee operations at the Federal Reserve ...

Wealth management is a financial service concept that emerged as a specific offering during the 1990s. Generally, firms that offer such a package provide a wide range of financial services to their clients that will include such basic elements as estate planning, asset management, and even private banking options. The ...

Dealer banks are entities that purchase and sell government or agency securities. A dealer bank may be a commercial bank that specializes in the sale of these types of securities, or a department of a bank that is devoted to handling the sale and purchase of various types of municipal ...

Trading books are essentially the portfolios of large financial institutions. They contain information about all the securities currently held by the institution, as well as the history of any and all accounting transactions involved in the buying and selling of the securities recorded in the book. This makes them a ...

It is relatively easy to open a Swiss bank account, and you don't have to be rich or have a reason to hide your money to do so. Essentially, Swiss laws have one major requirement for those who wish to open a Swiss bank account: an account holder must ...

A walk on a bank is a slow pull-out of deposited funds which occurs as consumers grow increasingly uneasy about the health of the bank. The end result of a walk on a bank can be financial ruin for the bank, as it runs out of liquidity for investment ...

A credit freeze or credit crunch is a situation in which the credit market grinds to a halt, essentially putting an entire economy into free-fall. While most average consumers are familiar with the basics of consumer credit in the form of credit cards, student loans, home equity lines of ...

Change has a way of accumulating and before long, there's too much to put in your wallet or pocketbook. You might end up with a pool of change on the dresser top. Instead, a coin bank on the dresser top will give you a place to put that change ...

One of the more common types of financial lending that is extended to businesses, the bank term loan is a certain type of loan that involves a fixed maturity and an amortization of the principal amount of the loan. Bank term loans may be used to establish a line of ...

Clearinghouse funds are resources that pass through banks in the Federal Reserve System. The instrument of transmission is normally a personal check from an individual client or a business check from a company that is either a direct client of the clearinghouse or is a clearing member. The main function ...

A lender of last resort, usually a national bank, is what banks and other financial institutions use as a place to obtain credit when nearly all other options have been exhausted. In the United States, the Federal Reserve Bank acts as a lender of last resort. In most cases, banks ...

The z-certificate is a document that is commonly issued as proof of ownership of stocks when the intent of the investor is to only hold on to the stock for a short period of time. Several financial institutions around the world issue the z-certificate or a similar document ...

In the United States, borrowed reserves have to do with the amount of funds that are extended upon request to the Federal Reserve Bank system by the federal government. The purpose of the borrowed reserve is to allow any banks that are classified as member banks of the Federal Reserve ...

A capital requirement is the amount of resources that are necessary to sustain the day to day function of a business. In many countries, government regulations require that in order for a company to engage in the business of banking or investments, the brokerage or dealer must demonstrate that it ...

The collection float is a term that is used in the world of finance in two different ways. On definition of a collection float has to do with investments, while the second definition is involved with deposits made into a bank account. In both cases, collection floats refer to some ...

Talking ATMS are automatic teller machines that provide the ability to conduct transactions using both visual and auditory components. Essentially, a talking ATM will provide a means of persons with visual impairments to utilize the ATM by making use of audible instructions. While many ATMs today include an audio component ...

Bank Night was a form of lottery used to promote the film industry in the 1930s, when the Great Depression made some consumers reluctant to spend money, especially on frivolities like movies. Although Bank Night was a short-lived tradition, some historians have suggested that it may have contributed significantly ...

A number of things happen when an FDIC-insured bank fails, but most people want to know what is going to happen to their money, and when they can expect to retrieve the value of their deposits. The Federal Deposit Insurance Corporation has a very clear set of policies which ...

The Federal Deposit Insurance Corporation (FDIC) watch list is a list of FDIC-insured banks which appear to be struggling. When banks land on the watch list, the FDIC monitors them closely, with the goal of preventing failure and being ready to swing into action if necessary. The contents of ...

The European Investment Bank (Banque Europeenne D'Investissement) is a leading financial institution in the European Union (EU). Its major shareholders are the member nations of the EU themselves, which creates a very high credit rating for the bank. As a result, it can borrow and lend on the international ...

Demand deposits are funds that are deposited in bank accounts and are available for withdrawal at the discretion of the depositor. The withdrawal of funds from the account does not require contacting or making any type of prior arrangements with the bank or credit union. As long as the account ...

The World Bank, more properly known as the World Bank Group, is a collective of five financial institutions which aim to improve conditions in the developing world. It is run like a multinational corporation, with numerous nations working together to direct funds where they are needed. The World Bank is ...

Direct sends involve bypassing the usual and standard processes used to clear checks. Instead of the depository bank posting the check to the proper account and then waiting for confirmation from the drawee bank to arrive over the course of a few days, the depository bank makes a direct contact ...

Foreclosure is an event that many people face where there is a shift in the economy, drastic changes in variable interest rates occur, or when a job loss renders a homeowner unable to keep making the monthly mortgage. Fortunately, there are a couple of ways to possibly avoid foreclosure and ...