Glencoe Secondary Marketing Essentials DECA Connection Glossary

Financial Services Marketing

Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

add-on interest Interest that is calculated on a loan, then added onto the principal to obtain the loan amount.

adjustable-rate mortgage loan (ARM) A mortgage in which the interest rate can be changed during the loan term, sometimes with limits on the amount it can be changed.

AIO segmentation Market segmentation by customers' attitudes, interests, and opinions; another term for psychographic segmentation.

alarm A device that a bank teller can activate in order to alert local police of a bank robbery, either during the act, or after it has occurred.

altered check A check that has been altered in some way in order to fraudulently gain funds from a bank.

amortization Repaying principal and interest on a loan through regular and equal installments in which each payment includes a larger percentage of principal and a declining percentage of interest.

amortization schedule A chart showing the installments required to repay an amortized loan, including the portion of each payment that will be attributed to principal and interest.

amount financed The amount borrowed minus any prepaid finance charges.

annual effective yield The actual interest rate paid on a deposit at the quoted compound interest rate, including the interest on interest accumulated during the compounding period.

annual percentage rate (APR) The actual cost of a loan over a year, or the actual yield on a savings account over one year.

automated teller machine (ATM) An electronic machine that allows customers to withdraw funds from their accounts, and sometimes make deposits or loan payments.

average daily balance The average balance of a savings account or loan, calculated by adding each day's balance and dividing by the number of days in the billing period (usually a month).

bad news message A business letter that communicates bad news to a customer, usually with a buffer statement to help cushion the blow of the bad news.

bait money Identifiable bills whose serial numbers have been recorded, that can be given to a robber and, if recovered, used as evidence in court.

bank card A credit card offered by a financial institution, that can be used at a variety of merchants. Example: Visa and MasterCard.

banking by mail A service that allows customers to made deposits or withdrawals through the mail, usually with postage-paid envelopes.

beneficiary A person who receives money from a life insurance policy.

bill counter A machine that counts bills, sometimes recognizing the denomination of the bills.

black light lamp A lamp that reads invisible signatures imprinted on passbooks, CDs, or plastic cards.

blank endorsement The simplest kind of endorsement, with only the payee's signature; makes a check good as cash.

bond A loan of money from an investor to a government or a business, which carries the government's or business's promise that the loan will be repaid with a specified amount of interest.

business philosophy One's particular set of beliefs or guiding principles for the way in which business is to be conducted with the public and through employees.

capacity One of the three Cs of credit that measures a loan applicant's income and other financial responsibilities.

capital One of the three Cs of credit that measures a loan applicant's assets that could be used to repay the loan.

cashier's check A check issued by a financial institution, often issued to pay a customer's loan proceeds, or to be used rather than cash when a customer makes a large withdrawal.

certificate of deposit (CD) A type of savings account in which a sum of money is deposited at a predetermined interest rate for a set amount of time.

certified check A personal or business check that the financial institution has guaranteed will be paid in the full amount, often required for large purchases.

change-dispensing machine A machine that holds a supply of coins at the teller window and dispenses them as needed for making change.

character One of the three Cs of credit that measures a loan applicant's reliability based on past credit history.

check An order written by a customer ordering a financial institution to pay a specified amount of money from the customer's account to another party.

check kiting A fraudulent scheme in which a customer "makes money" by depositing fraudulent checks in one institution and withdraws them from before the fraud can be discovered.

checking account An account in which customers can write checks to access the money deposited in their account.

close the window End the business day; tasks include counting and sometimes wrapping currency, and balancing accounts.

club account A statement savings account set up for a specific purpose, such as saving for a vacation or holiday, and often requiring the customer to make regular deposits.

coin counter A machine that separates and counts loose change automatically.

coin wrapper A machine that automatically wraps loose coins after they have been counted.

collateral Something held by the financial institution which the lender can take possession of if payments are not made on a loan.

combination card A debit card that also contains an overdraft line of credit.

commercial bank The typical American bank; pools the money of the general public that is not immediately needed by them and make it available to others through loans.

compound interest Interest calculated on the principal and any interest that has accumulated to date.

conditional endorsement A special endorsement that requires that some condition must be met before the check can be paid.

consumer loan A loan provided to a customer by a financial institution to pay for a specific purchase such as a car or home.

correction Fixing mistakes or filling gaps in employees' knowledge, skill, or attitudes.

counseling technique A selling technique that involves carefully determining a customer's needs, then suggesting the financial package to meet those needs.

counterfeit check A check that resembles a legal check, but is actually a fraudulent reproduction.

credit An agreement in which one entity allows another to use goods, services, or money immediately and promise to pay for them at a future date.

credit bureau A company such as TransUnion, Equifax, or Experian that gathers information about customers' credit repayment histories in order to provide lenders (for a fee) with information they need to analyze credit applications.

credit institution An institution that grants business or consumer credit; includes banks, credit unions, finance companies, and retail stores.

credit union A financial institution owned by its members (who share a mutual bond, usually working for the same company or industry) in which only members may make deposits or borrow money.

cross-sell Suggest other products or services that the customer has not specifically requested.

data processing Handling information, either manually or electronically, such as posting daily transactions and computing interest.

debit card A card that looks like a credit card, but acts like a check, making an automatic payment from a cardholder's account to a merchant.

demand deposit Money deposited in a financial institution that can be withdrawn at any time, without prior notice.

demand deposit account An account in which the customer is allowed to withdraw funds without prior notice at any time; describes checking and most savings accounts.

deposit account An account into which a person or entity can deposit funds in order to save them for future use; includes savings and checking accounts.

discount brokerage firm An investment firm that offers fewer services than a full-service firm and lower commissions.

discount interest A method of calculating a loan in which interest is calculated on the principal and subtracted to determine the amount given to the borrower.

dividend A portion of net revenue paid to stockholders by a corporation.

drive-up windows A teller window outside a branch, enabling a customer to make withdrawals or deposits without leaving the car.

encoding machine A machine that prints Magnetic Ink Characters Recognition (MICR) characters on checks, deposits, and other documents; primarily used to print customer account numbers on temporary checks.

endorsement The transfer of rights to a negotiable instrument from the holder to someone else by way of a signature and other writing on the back of an instrument.

endorser The person who has endorsed a check.

Equal Credit Opportunity Act (ECOA) A law created to ensure that lending institutions review all customers' credit applications on the same criteria and do not reject applications based on a person's race, marital status, sex, or other factors that do not affect a person's ability to repay a loan.

exact interest-exact time A calculation of the exact interest figure for part of a year.

Expedited Funds Availability Act A law that set standards for check endorsements and establishes maximum time limits that may be used by financial institutions when placing holds on customer checks.

face value The value of a savings bond at maturity.

Fair Credit and Charge Card Disclosure Act of 1988 A law that amended the Truth in Lending Act to require credit card issuers to disclosure to customers details of credit terms when they solicit customers' new business.

Fair Credit Billing Act A law that ensures that borrowers have the right to question a bill from a creditor and do not have to pay the disputed amount until the dispute is resolved.

Fair Credit Reporting Act A law that gives customers the right to know the reason credit was denied, and regulates the collection and reporting of credit histories.

Fair Debt Collection Practices Act A law that regulates third parties that collect debts for creditors, specifically prohibiting abusive collection activities, such as obscene language and violence, and limiting when and how often collection agencies can call customers.

Federal Deposit Insurance Corporation (FDIC) A federal agency that insures all funds deposited in banks up to $100,000.

finance companies Businesses that lend consumers money to buy automobiles and other large-ticket items, and lend businesses money, usually to finance their inventories.

financial services Describes the business of investing, borrowing, and lending money, and all related activities.

fixed-rate mortgage loan A mortgage in which the interest rate and monthly payment are fixed when they loan is established and do not change during the loan term.

forgery The illegal act of signing another person's name or altering another person's signature as part of a fraudulent scheme.

four-step method of learning Prepare the learning, present the material, try out under supervision, check on learning.

fraud Intentional deception aimed at improperly or illegally obtaining money or valuables from a person or institution.

full-service bank A bank that offers a wide range of financial services beyond deposit and loan services, such as credit cards, trust administration, and investment counseling.

full-service brokerage firm An investment firm offering a wide range of services and investment products, including research and advice for investors.

good news message A business letter that communicates good news to the customer.

government check A check issued by the U.S. Treasury Department to pay a federal government obligation; also called a Treasury check.

hand-to-counter method A method of detecting counterfeit bills in which a teller looks at each bill while counting currency, then lays each bill on the counter.

hold A restriction that stops all or a specific part of a checking or savings account from being paid out.

holding company A company that owns all or a majority of another company, especially a financial institution.

home banking Online banking that allows customers to link their home computer to the financial institution's computer to read account information and make transactions.

home equity loan A loan secured by equity in the borrower's home; also called a second mortgage.

Home Equity Loan Consumer Protection Act of 1988 An amendment to the Truth in Lending Act that requires lenders to disclose certain terms, and prohibits them from changing loan terms once the loan has been granted.

in-person application A loan application that involves a face-to-face interview with the customer.

inactive account An account for which no deposit or withdrawal transactions have been performed during a specified period of time.

individual retirement account (IRA) An individual pension plan, usually a deposit account with a financial institution; often tax deferred, from which funds cannot be withdrawn before retirement.

initial deposit The amount of money deposited to open a new account.

installments Regular (usually monthly) payments on a loan.

interest A percentage of principal paid by a borrower or a percentage of money paid to a depositor on a savings account.

interest rate The rate at which interest is charged or paid.

interest rate cap A limit on the maximum interest that can be charged on an adjustable-rate loan.

internal audit A periodic count of all cash at a teller's station to ensure that deposits and withdrawals balance with the amount that should be at that station.

investment The commitment of present funds in order to get future income; usually refers to funds that lack liquidity, are not guaranteed, and require a long time commitment, such as stocks, bonds, mutual funds, and real estate partnerships.

investment bank A business that specializes in building capital by buying securities or underwriting public offerings.

junk bond A bond issued by a corporation with a below-investment rating, but a high yield.

Keogh An individual retirement plan available to self-employed individuals and their employees.

lending policies Guidelines under which loan officers may grant a loan.

letter of persuasion A business letter created to persuade a customer or potential customer to do something; often sales letters or collection letters.

life insurance Money set aside each month to provide for dependents in case of the policy-holder's death.

limited partnership A pool of money gathered from many investors and used to purchase property.

line of credit account A credit line with check-writing capability in which the customer only borrows the amount for which they have written checks.

liquid Refers to funds or assets that can be readily converted into cash.

mail-in application A loan application taken through the mail; frequently used by credit card companies or merchants offering revolving credit accounts.

marketing concept The business philosophy held by banks and other financial institutions that all efforts should be aimed at satisfying the customers at a profit.

marketing integration Everyone who is employed in the financial institution has a customer-oriented philosophy.

matured The term for a CD or similar account that has been deposited for the predetermined term.

maturity value The total value of a loan, including principal plus all accumulated interest, or the total value of a timed deposit account, including the opening deposit and all accumulated interest.

microfiche A small rectangular film that can store images of many pages of documents; used to reduce required storage space.

microfiche reader A machine that magnifies the images on microfiche so they can be read.

money market deposit account An interest-bearing account with a high minimum balance, usually paying a higher interest rate than a standard savings account, with a limit on the number of withdrawals during a specified period.

money order A check that a customer can buy for a small fee from some financial institutions or the U.S. Postal Service, issued to a specific payee for a specific amount.

money validator A machine that prints information such as payment amount on cashier's checks and money orders.

mortgage A secured loan for which the collateral is real property (usually a home).

mutual fund A pool a money gathered from many investors and used to purchase securities.

negotiable certificates of deposit A CD that can be sold before the maturity date in order to raise cash for a depositor.

negotiable instrument Any document, such as a check, that contains a written order for one party to pay funds to another and meets federal requirements for negotiable instruments.

night depository A designated location where deposits may be placed for safekeeping after regular business hours.

nonnegotiable Describes any financial instrument that fails to include all the elements required of negotiable instruments.

open-end consumer credit Enables the borrower to have access to a line of credit when needed.

open the window Start a new business day; tasks include checking supplies, obtaining sufficient coins and currency for the day, and recording the day's opening balance.

ordinary interest-exact time A calculation of the exact interest rate for part of a year, calculated based on a 360-day year.

ordinary time-ordinary interest A calculation of the exact interest rate for part of a year, based on a 30-day month; sometimes called 360/360 calculation.

orientation An organized effort on the part of a financial institution to acclimate a new worker to the firm, job, and co-workers.

overdraft protection A credit line from which a check can be paid if there are insufficient funds in the customer's account.

passbook savings A savings account in which a customer must present a record of transactions called a passbook each time they make a deposit or withdrawal.

people The managers and employees of a bank or other financial institution; often equated with the company by customers.

personal or business checks The most common kind of check; written to withdraw funds from a personal or business checking account.

petroleum or retail store card Any credit card offered by a particular business, usually revolving credit aimed at making purchases more convenient and building customer loyalty.

place Includes location of a branch, as well as aspects associated with the delivery of the financial institution's services, including building appearance, hours, and availability of other services such as ATMs.

point-of-sale terminal An electronic terminal in a retail store that allows direct electronic payment for goods.

prime rate The interest charged by banks on short-term loans to businesses with the best credit ratings.

principal The total sum of money borrowed.

product For a financial institution, products are services designed to meet customers' wants and needs.

promissory notes Statements of promise to pay, which are used in conjunction with loans.

promotion Any form of advertising, promotion, or public relations that a financial institution uses to inform a target market about their products and services.

public relations A form of unpaid, nonpersonal communication, the goal of which is to present the bank in a favorable light through news stories and other media coverage.

qualified endorsement An endorsement that includes the words "Without Recourse," followed by the endorser's signature, and means that the endorser does not have to pay if the check is not honored.

regular savings account An account that requires a low opening deposit, allows withdrawals at any time, and pays a fixed interest rate.

relationship banking A banking philosophy that aims to establish long-term relationships with customers and reduce the customer's desire to go elsewhere for banking services.

restrictive endorsement An endorsement that specifies the purpose of the transfer, and eliminates other uses; usually "For Deposit Only."

revolving credit A credit card that allows payments to be spread over an indefinite period, usually with a minimum required monthly payment; frequently offered by department stores and major petroleum companies.

robbery Taking money or property from another person by force or threat of force.

savings Usually refers to liquid funds invested for a short time, sometimes refers to timed accounts such as certificates of deposit.

safe-deposit box A fireproof box in a bank's vault rented by customers for a small fee for storage of valuables such as stocks, bonds, CDs, birth certificates, insurance policies, and jewelry.

savings & loan association (S&L) A financial institution whose primary business is accepting deposits and loaning money, usually to individuals for the purchase of homes and autos.

savings account loan A secure loan in which the collateral is the customer's savings account.

secure Describes a loan for which the financial institution holds title to the item financed to ensure repayment of the loan.

securities Investments in a business corporation, a financial institution, or a government agency; either stocks or bonds.

Securities and Exchange Commission (SEC) A federal agency charged with protecting investors and maintaining the integrity of the securities markets.

semantics Describes the situation when a word means one thing to one person and something different to someone else.

SEP-IRA A retirement plan in which employers can establish IRAs for groups of employees.

share account An interest-earning checking account at a credit union.

share draft A customer's order to withdraw funds from a share account; similar to a check.

short-change scheme A fraudulent attempt to get a teller to return the incorrect change to a customer.

signature card A card signed by a bank customer that can be used as signature verification and that serves as evidence that the customer has accepted the terms of the account.

simple interest Interest calculated on the original balance only, not on accumulated interest.

single payment credit Any loan that is to be paid off in one future payment.

single payment loan A loan that can be repaid in one sum at the end of the term.

special endorsement An endorsement that ensures the check will be paid to the intended recipient; "Pay to" or "Pay to the Order of" is written on the back of the check, followed by the payee's name.

split deposit A deposit in which only a portion of the full deposit amount is deposited into the customer's account, and the customer requests the balance as cash.

statement savings account A savings account that allows electronic deposit or withdrawal of funds, often requiring a minimum balance.

stock A share of ownership in a company.

stockholder Someone who owns stock in a company.

stop payment An order that prevents funds from being paid on a certain check or checks.

supervision The direction and management of other bank employees.

supervisor Someone who recruits, hires, trains, and supervises other employees in order to achieve management's goals.

surveillance camera A camera inside a bank branch that records activity in the bank, and can be used to identify bank robbers.

telephone loan application A loan application taken over the phone.

teller machine A bookkeeping machine that is used to record the amount of each transaction at a teller's window.

teller vault A secure place where a teller stores the currency and coins needed for the day's transactions.

term The length of deposit for funds in a CD or similar account.

three Cs of credit Character-the applicant's honesty and reliability, determined through a review of the applicant's credit history; capacity to pay-analysis of the applicant's income and other financial responsibilities; capital-assets that could be used to repay the loan.

time The total period a borrower will be able to use borrowed money before having to repay it.

time deposit account An account in which the customer is required to leave the funds in the account for a specified period of time; describes CDs.

travel and entertainment card A type of credit card that is a single-payment account. Example: American Express, Carte Blanche, and Diners Club.

traveler's check A check commonly used in place of cash; designed for use when traveling.

trust Property held and managed by one entity for the benefit of another person.

trust banking The services performed by a bank in relation to trusts held in that bank, including administering trusts, settling estates, and handling pension and profit-sharing plans.

Truth in Lending Act A law that requires financial institutions to inform customers of credit terms and to explain the actual cost of any loan.

Truth in Lending Simplification and Reform Act A law that requires that lenders disclose loan terms in simple English and that pertinent information such as APR and finance charge be highlighted in separate "federal boxes."

Uniform Commercial Code (UCC) A set of regulations covering most business transactions, including requirements for negotiable instruments.

unsecured loan A loan made without collateral; any loan approved solely on the borrower's promise to repay the debt.

usury Describes the practice of charging interest rates that exceed legal limits.