Banking Glossary: 37 Terms Explained in Plain English

ACH (Automated Clearing House)

The U.S. network that moves batches of electronic payments between bank accounts, including direct deposit of paychecks, Social Security benefits, and many bill payments. It is governed by Nacha's operating rules, and the Federal Reserve (FedACH) and The Clearing House are the two ACH operators. ACH payments generally do not settle on weekends or Federal Reserve holidays.

See the bank holiday schedule.

Payments · Source: Nacha: What is ACH?

APY (annual percentage yield)

The total amount of interest you would earn on a deposit over one year, expressed as a percentage and including the effect of compounding. Under the Truth in Savings Act and Regulation DD, banks must disclose APY so accounts can be compared on the same basis. Because it includes compounding, APY is equal to or higher than the account's stated interest rate.

Try the savings calculator or see national average rates.

Rates · Source: CFPB: Regulation DD (Truth in Savings)

ATM (automated teller machine)

A machine that lets you withdraw cash, check balances, and often deposit checks without a teller. Your bank may charge a fee for using another bank's ATM, and the ATM owner may add its own surcharge, which must be disclosed before you finish the transaction under the Electronic Fund Transfer Act's Regulation E.

Accounts · Source: CFPB: Regulation E

Bank failure

When a bank's chartering authority closes it, usually because it can no longer meet its obligations. The FDIC is appointed receiver and either arranges for a healthy bank to assume the insured deposits or pays depositors directly, up to the insurance limit. The FDIC publishes a list of every failed bank since October 2000.

Safety · Source: FDIC: Bank Failures

Bank holding company

A company that owns or controls one or more banks. Bank holding companies are supervised by the Federal Reserve. In FDIC data, each bank's holding company is listed as the regulatory high holder, and banks under the same holding company are still separately chartered for deposit insurance purposes.

Each bank page and comparison on this site lists the holding company from FDIC data.

Industry · Source: Federal Reserve: Supervision and Regulation

Bank holiday

A day the Federal Reserve Banks are closed, so ACH and Fedwire payments do not settle. Most banks close their branches on these days too, but each bank sets its own hours. There are 11 Federal Reserve holidays a year, with special rules when a holiday falls on a weekend.

See bank holidays 2026 and 2027.

Accounts · Source: Federal Reserve: K.8 holiday schedule

Beneficiary (POD account)

A person you name to receive the money in an account when you die. An account with named beneficiaries is often called payable on death (POD) or in trust for (ITF). Since April 1, 2024, the FDIC insures trust accounts, including POD accounts, up to $250,000 per owner per beneficiary, with a maximum of $1,250,000 per owner at one bank (five or more beneficiaries).

Safety · Source: FDIC: Your Insured Deposits

Branch

A physical office of a bank where you can do business in person. The FDIC tracks every insured bank's branches, including whether each is a full-service office or a limited-service location such as a drive-through or a facility inside a retirement community.

Find a branch near you.

Industry · Source: FDIC BankFind Suite

Call report

The quarterly financial report every FDIC-insured bank files with its regulators, showing assets, deposits, income, loans, and capital. The data are public. The asset, deposit, and income figures on this site's bank pages come from call reports via the FDIC.

Industry · Source: FDIC: Call Reports

Cashier's check

A check issued by a bank and drawn on the bank's own funds rather than your account. Because the bank guarantees it, sellers often require one for large purchases. You pay the bank the amount plus any fee up front.

Payments · Source: CFPB: What is a cashier's check?

CD (certificate of deposit)

A deposit account that pays a fixed interest rate for a set term, such as 6 months or 5 years, in exchange for keeping the money in the account until the CD matures. Withdrawing early usually costs an early withdrawal penalty. Bank CDs are FDIC insured and credit union certificates are NCUA insured.

See best CD rates and the CD calculator.

Rates · Source: CFPB: What is a certificate of deposit (CD)?

CD ladder

A strategy of splitting savings across several CDs with staggered maturity dates (for example, 1, 2, 3, 4, and 5 years). As each CD matures you can spend the money or reinvest it at current rates, which keeps part of your savings available regularly while still earning longer-term rates on the rest.

Model each rung with the CD calculator.

Rates · Source: Investor.gov: Certificates of Deposit

Charter (bank charter)

The license that lets a bank operate. National banks are chartered by the Office of the Comptroller of the Currency (OCC); state banks are chartered by a state banking department and are supervised federally by either the Federal Reserve (member banks) or the FDIC (nonmember banks).

Industry · Source: OCC: About Us

Checking account

A deposit account for everyday spending, with a debit card, checks, bill pay, and transfers. Checking accounts usually pay little or no interest. Fees, minimum balances, and overdraft policies vary by bank and are listed in each account's disclosures.

Accounts · Source: CFPB: Bank accounts

Community bank

A bank that focuses on traditional lending and deposit-taking in a limited geographic area. The FDIC flags community banks in its data using a definition from its Community Banking Study that looks at activities and geographic scope, not only asset size.

See the Bank Near Me Facts page.

Industry · Source: FDIC: Community Banking

Compound interest

Interest earned on both your original deposit and the interest already added to it. The more often interest compounds (daily, monthly, quarterly), the more you earn at the same stated rate, which is why APY can be higher than the interest rate.

See compounding in action with the savings calculator.

Rates · Source: Investor.gov: Compound interest

Credit report

A record of your credit accounts and payment history kept by the three nationwide credit bureaus (Equifax, Experian, and TransUnion). You can get free copies from each bureau at AnnualCreditReport.com, the only source authorized by federal law for free reports.

Read our free credit reports guide.

Credit · Source: AnnualCreditReport.com

Credit score

A number calculated from the information in your credit report that lenders use to estimate how likely you are to repay. There are many scoring models, so you may have different scores. Your free credit reports do not automatically include a score.

See our credit reports guide.

Credit · Source: CFPB: Credit reports and scores

Credit union

A member-owned, not-for-profit financial cooperative. Deposits (called shares) at federally insured credit unions are insured by the National Credit Union Administration's Share Insurance Fund up to $250,000, the same limit as FDIC insurance. Credit unions are not FDIC insured and are not included in FDIC branch data.

Industry · Source: NCUA: Share Insurance Coverage

Debit card

A card that takes money directly out of your checking account when you pay or withdraw cash. Federal Regulation E limits your liability for unauthorized debit card transactions, and the limit depends on how quickly you report the loss.

Payments · Source: CFPB: Regulation E

Direct deposit

An electronic payment, such as a paycheck or government benefit, sent straight into your account over the ACH network. Direct deposits scheduled for a weekend or Federal Reserve holiday usually arrive on the business day before or after, depending on the payer.

See holidays and payments.

Payments · Source: Nacha: What is ACH?

Early withdrawal penalty

The fee a bank charges if you take money out of a CD before it matures, often expressed as a number of months of interest. The penalty must be disclosed before you open the account under Regulation DD, and it can exceed the interest you have earned.

Rates · Source: CFPB: Regulation DD (Truth in Savings)

FDIC (Federal Deposit Insurance Corporation)

The independent federal agency that insures deposits at banks and savings associations, supervises many state-chartered banks, and handles bank failures. FDIC insurance is backed by the full faith and credit of the U.S. government, and no depositor has lost a penny of insured funds since the FDIC began in 1934.

Every bank on BankNearMe.com is FDIC insured; search banks near you.

Safety · Source: FDIC: Deposit Insurance

FDIC certificate number

A unique number the FDIC assigns to each insured institution. It stays with the charter, so it is the most reliable way to identify a specific bank, especially when several banks share similar names. Every bank page on this site shows its FDIC cert.

Industry · Source: FDIC BankFind Suite

FDIC insurance limit

The standard maximum deposit insurance amount: $250,000 per depositor, per insured bank, for each account ownership category. Money in different ownership categories, or at separately chartered banks, is insured separately, so you can be covered for more than $250,000 in total.

Safety · Source: FDIC: Your Insured Deposits

Federal funds rate

The interest rate banks charge each other for overnight loans of reserves. The Federal Open Market Committee (FOMC) sets a target range for it, and changes in that range ripple through to the rates banks pay on savings and CDs and charge on loans.

Chart it on our national rates page.

Rates · Source: Federal Reserve: Federal Open Market Committee

Fedwire (wire transfer)

The Federal Reserve's real-time gross settlement system that banks use for wire transfers. A wire moves money between banks the same day and is generally final once sent, so it's a common target for scams. Fedwire does not operate on weekends or Federal Reserve holidays.

Payments · Source: Federal Reserve Financial Services: Fedwire Funds Service

Funds availability (hold)

How soon you can use money you deposit by check. Regulation CC sets the maximum time banks can hold most deposits and requires them to make certain deposits, such as government checks and the first portion of a day's check deposits, available by the next business day.

Accounts · Source: eCFR: Regulation CC (12 CFR Part 229)

Joint account

An account owned by two or more people who have equal rights to withdraw. The FDIC insures each co-owner's share of all joint accounts at one bank up to $250,000, separately from their single accounts, so a couple can have up to $500,000 in joint accounts covered at one bank.

Safety · Source: FDIC: Your Insured Deposits

Money market deposit account

A savings-type deposit account that often pays a higher rate than basic savings and may come with checks or a debit card. It is FDIC insured. It is different from a money market mutual fund, which is an investment and is not FDIC insured.

Accounts · Source: FDIC: Financial Products That Are Insured

National rate (FDIC average)

The FDIC's published average rate for savings, money market, checking, and CD products, calculated from rates offered at insured banks and branches. Because it includes many large banks that pay very little, the national average is far below the best rates available from online banks.

See today's averages on our rates page.

Rates · Source: FDIC national rates via FRED (SNDR)

Overdraft

When you spend more than you have in your account and the bank covers the shortfall, often for a fee. For ATM withdrawals and one-time debit card purchases, a bank cannot charge an overdraft fee unless you have opted in to its overdraft coverage. Overdraft policies and fees differ from bank to bank.

Accounts · Source: CFPB: What is overdraft coverage?

Ownership category

The legal way an account is owned, which determines how the FDIC insures it. Categories include single accounts, joint accounts, certain retirement accounts (such as IRAs), trust accounts, employee benefit plan accounts, business accounts (corporation, partnership, unincorporated association), and government accounts. Each category is insured separately.

Safety · Source: FDIC: Your Insured Deposits

Routing number

The nine-digit ABA routing transit number that identifies a bank for checks, direct deposit, and wire transfers. It is printed at the bottom left of your checks. Large banks may use different routing numbers for different states or for wires, so confirm with your bank.

Payments · Source: American Bankers Association: Routing Number

Savings account

An insured deposit account for money you want to keep and grow, paying interest. In April 2020 the Federal Reserve removed Regulation D's six-per-month limit on convenient withdrawals and transfers, but many banks still set their own limits.

See the savings calculator.

Accounts · Source: Federal Reserve press release, April 24, 2020

Treasury bill (T-bill)

A short-term U.S. government security sold at a discount and maturing in 52 weeks or less. T-bills are not bank deposits and are not FDIC insured, but they are backed by the U.S. government. You can buy them through TreasuryDirect or a brokerage.

Compare yields on the rates page.

Rates · Source: TreasuryDirect: Treasury Bills

Unclaimed property

Money in an account with no owner activity for a period set by state law (often three to five years) is turned over to the state, a process called escheatment. You can search for and claim it for free through your state's unclaimed property program.

Accounts · Source: NAUPA: Unclaimed.org