The Dictionary of Banking Terms: What You Need To Know (P 1)

As with most industry professionals, bankers tend to have their own work terminology. You may not understand this terminology unless you’ve visited the bank several times and have started to pick up on some things. Here, we will give you a brief overview of some basic concepts to give you a helping hand.

Current Account

This is a type of bank account where you can store and withdraw money without any interest on your deposits. Current accounts are usually used for day-to-day banking. This account facilitates various actions, including payments of phone bills, utility bills, rent payments, and making cash deposits. In addition, most people will get their salaries paid into their current accounts.

Savings Account

A savings account is a type of bank account that allows you to deposit and withdraw funds at your convenience while earning interest on your contributions, with quarterly, bi-annual, or annual returns. Minors can open a savings account through a designated guardian.

To learn more about these two account types, check out the difference between a savings account and A Current Account.

Overdraft Account

This is a current account that is opened with a deposit guarantee or a certificate of deposit. The main benefit of an overdraft account is money can still be withdrawn from it, even if the account balance goes below zero. It is a type of extension of monetary limit or a type of loan offered by banks. A customer can withdraw money up to an authorized limit. However, it is important to note that banks charge an interest rate on the money withdrawn, and there is usually a fee per overdraft.

IBAN

IBAN is a bank account number recognized by banks and financial institutions worldwide, which helps facilitate the transfer of funds from abroad. This is the standardized method of identifying a bank account, which reduces errors and delays in sending international payments.

A savings account is a type of bank account that allows you to deposit and withdraw funds at your convenience while earning interest on your contributions

Check Endorsement

When someone pays you by check, you usually have to sign it before you can deposit it in your account. To do this, turn it over and sign your name on the back to endorse/approve it. By doing so, you authorize your bank to settle the funds associated with the check.

Crossed Check
 

This type of check is intentionally crossed with two parallel lines, either across the entire check or on the top left-hand corner. This signifies that the check may only be deposited directly into a beneficiary’s bank account and cannot be immediately cashed by a bank or any other financial institution.

P.O.S. Machine

A POS (Point of Sale) machine is an electronic device that accepts and processes credit and debit cards payments. Most retail stores use these machines to facilitate payments of their goods and services. 

Investment Fund

This is a financial pool in which capital is calculated in the millions and owned by a large number of investors. It is generally run by trading specialists and experts in the stock market, whose primary role is to thoroughly examine which companies to invest in and accordingly make buying and selling decisions on your behalf. This reduces the risk of trading without sufficient experience on your part.
 

Learn more about the stock market here; What Is The Stock Exchange? How to Start Investing in Stocks!

Buyout Debt
 

If you have an existing loan from your bank that you are struggling to pay off, it is possible for another bank to ‘buy your debt’ and help you settle this loan. This is useful in many cases. For instance, let's say you want to take out a new loan at a bank and have installments to pay in another bank. Instead of paying each institution separately, you can move all your debt to the new bank, which will essentially ‘buy the debt you owe and, thus, you can pay all your debts in one place.