In Primary Trust, Kenneth gets a job at a bank, and quickly learns the financial terminology used there. In the era before smartphones, most bank transactions had to be done in-person at the bank, speaking face-to-face with a teller.
Bank: A bank is a financial institution licensed to hold deposits and loan money. Services and accounts offered by banks are called financial products. Many banks are for-profit businesses, though mutual banks are non-profits owned by their members. Banks earn money by charging higher interest rates on loans and credit cards than they pay on deposit accounts.
Deposit: Adding money to an account.
Withdrawal: Taking money out of an account.
Transfer: Moving money from one acount to another.
Debit Card: A small plastic card that can be used to make purchases or withdraw money from an ATM. The money comes directly out of the owner's checking account.
Credit Card: A small plastic card with a microchip in it that can be used to make purchases up to a specified credit limit. Purchases are made “on credit”: the card issuer, often a bank, loans the user the money for the purchase and charges interest on it. Credit card interest rates are very high. Credit card users can avoid paying interest by paying their card off in full each month.
Credit Limit: A credit limit is maximum amount of money a financial institution will allow a person to borrow on a specific line of credit.
Credit Rating: A credit rating is an assessment of a person or business’s credit worthiness—the likelihood that they will be able to pay back their debts. Credit ratings are expressed as numbers and calculated by credit bureaus.
Checking Account: A checking account is a type of deposit account that allows frequent withdrawals via check, automated teller machine (ATM), or electronic debits. Checking accounts are used for keeping money to pay regular bills.
Savings Account: A savings account is a type of deposit account that pays interest. Savings accounts are used to hold money for emergencies, or to save up for longer-term purchases.
Money Market Account: A money market account (MMA) combines features of savings and checking accounts: account holders can write checks or use a debit card, and earn a higher interest rate on their money. Most banks require customers to keep a certain amount of money, usually thousands of dollars, in the MMA. Money market accounts can offer higher interest rates than savings accounts because banks are allowed to invest them in certain low-risk securities, like treasury notes and certificates of deposit.
Certificate of Deposit: A certificate of deposit (CD) is a savings product. A person invests a lump sum of money into a CD for a set period of time, and the bank pays them a guaranteed interest rate at the end of that time period. If the investor withdraws money before the end of the time period they lose some of the interest earned.
Certificate of Release: A certificate of release is a document issued by a bank certifying that a mortgage has been fully paid.
ATM: An ATM, or automated teller machine, is a machine which allows a customer to deposit, withdraw, or transfer funds without having to speak with a bank teller. Unlike bank lobbies, ATMs are open 24 hours a day, seven days a week. ATMs became widespread in the US in the late 1970s and ‘80s.
Mortgage: A mortgage is a type of loan used to purchase real estate. Borrowers typically pay off their mortgage over a period of 15 or 30 years. The loan itself is secured by the property purchased: fail to pay your mortgage and the bank will foreclose (take ownership of) the property.
Cashier's Check: A cashier’s check is a check drawn on the bank’s funds, rather than on an individual checking account holder’s funds. It is more secure: the bank is guaranteeing the money is available. Cashier’s checks are used for larger purchases such as homes or cars.
Canceled Check: A canceled check is a check that has been successfully processed by a bank.
IRA: An IRA, or individual retirement account, is a type of investment account that is exempt from some taxes. IRAs are used to encourage Americans to save for old age. Money in an IRA cannot be accessed until the owner reaches the age of 59 years and 6 months.