Being aware of basic banking and finance processes — and the terminology that people use to talk about them — can make a significant difference to your bank balance.
That’s why we’ve made a list of 5 banking terms you should know, so you are able to manage your money better.
Routing Number
This is a string of 9 digits that identifies your financial institution. Large banks may have over one routing number (typically one for each branch location).
FDIC
The Federal Deposit Insurance Corp (also known as FDIC) is an organization that is responsible for insuring the bank deposits of customers. Deposits up to $250,000 are insured, which comes in handy if the bank fails. In case you are opening an account with a credit union, you should know that the National Credit Union Administration is the equivalent of the FDIC.
APY
The Annual Percentage Yield (also known as the APY) is the amount of interest that you can gain if you keep your money in your bank account for a full year, including compound interest. Don’t confuse this with APR, which stands for Annual Percentage Rate. The APR, in comparison, is the amount of money you can gain by keeping money in your account for a year, not including compound interest. You may also see the APR being mentioned in the context of loans – in this case, it represents the overall cost of borrowing money.
Savings Account
A savings account is an interest-bearing account that is used to hold money for emergencies or short-term or long-term goals. You can add money to this account at any time of the year, but some accounts may limit how many times you can withdraw your funds.
Checking Account
A checking account is a type of account into which money is deposited on a regular basis. You can also write checks if you have such an account. Many people use their checking accounts to pay their bills or receive their wages. While many banks offer no-fee checking accounts, some banks charge you a nominal fee to maintain your checking account with them.
