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									                                 Teaching Strategies/Activities
                                              Financial Services
                                              CIP No. 52.0800


Account Analysis -- The practice in some banks of computing the cost of maintaining a
business checking account. (See business account charges.)

Account Balance -- The money on deposit in an individual account.

Administrator -- An individual of the bank appointed by a court to settle the estate of a
deceased person who named no executor in his/her will or whose named executor refuses
to act, where incompetent, or has died.

Advice (of credit or debit) -- A written notice of account activity A form mailed to
advise the customer of adding to or subtracting from his/her account due to an error.

American Bankers Association (ABA) -- An organization founded in 1875 with the
purposes of advising banks on economic, political and social changes that could affect
banks or banking customers and to improve the standards of bank management and

American Institute of Banking (AIB) -- A branch of the American Banker Association
which offers a variety of courses designed to educate bankers in the basics of banking.
The American Institute of Banking is the largest evening adult education organization in
the country.

Annual Percentage Rate (APR) -- The rate used to determine finance charges (interest)
for lending money or the interest rate paid for interest bearing accounts. By law, this
figure is stipulated by all banks in a uniform way (called disclosure) so that customers can
make educated comparisons when shopping for services.

Assets-- Balance sheet entries showing properties or claims against others that may be
directly or indirectly used to cover liabilities. Assets increase wealth.

Audit -- An investigation into operations of a bank. The audit of a bank’s operations
serves to prevent fraud and errors and determine the accuracy of accounting and
bookkeeping procedures.

Automated Teller Machines (ATM) -- A device that permits bank customers to make
transactions in their bank accounts without teller assistance, 24 hours a day, seven days a
week. Transactions made at ATMs owned by anyone other than the customer’s bank is

Teaching Strategies for Financial Services,                                         Page 1 of 12
called a foreign ATM transaction. There are usually two charges for this transaction: the
charge from the foreign bank and a charge from the drawee bank.

                                              Teaching Strategies for Financial Services

Average Balance -- The amount in an account which can be withdrawn without
restrictions. The amount is the balance showing that the drawee bank has either given
immediate credit on or has collected all deposited funds on.

Balance -- The total amount in an account.

Bank -- Any institution, chartered by an arm of state or national government, that
accepts deposits, makes withdrawals, grants, loans and conducts banking functions.

Bank by Mail -- A service that allows a customer to mail transactions to the bank; some
banks will mail receipt back---others will not.

Bank Draft -- A check drawn by a bank against an account maintained in another bank.

Bond -- A certificate of debt, usually issued by a government entity or corporation, that
entitles the owner to interest.

Branch -- A bank office that operates separate from, but under the direction, of a bank’s
main office and charter.

Brokers -- Federally licensed representatives who handle the purchase or sale of
securities for individuals.

Canceled Check -- A check that has been paid against the maker’s account by the
drawee bank. The check has been subtracted from the balance.

Cash Advance -- A cash loan from a bank obtained with a credit card.

Cashier’s Check -- A check drawn on a bank’s own funds. The check maker and the
drawee bank are the same. The check must be signed by a bank officer.

Cash Item -- An item (usually a check) that a bank accepts for immediate credit to an
account, or that the bank will exchange for currency. This means that even if the funds
have not been collected from the drawee bank, the depository bank will consider the
item good. The item can be cashed or deposited and credited to the account without an
uncollected fund hold placed on it.

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                                              Teaching Strategies for Financial Services

Central Information File (CIF) -- A centralized record of the services used by each
customer of the bank. It is a database which can be accessed by: name, social security
number or account number. It lists information regarding account ownership, signature
data, number of insufficient fund checks written, number of years the amount has been
open, stop payments issued and much more.

Certificate of Deposit (CD) -- A receipt issued in the name of the customer for a specific
sum of money kept on deposit for a specific period of time and earning a specific rate of
interest. The interest is usually higher than passbook savings plans but has penalties for
early withdrawal.

Certified Check -- A check drawn by a depositor on his account that has been certified
by a bank officer. The funds are withdrawn from the customer’s account and credited into
an account held by the bank. A certified check is guaranteed to be paid, if it is properly
presented and endorsed. Banks in Arizona do not certify checks; they use Cashiers Checks

Check -- A written instruction from a depositor to pay another person/organization a sum
of money. Checks are negotiable instruments. The parts of a check are: the payee (the
person or organization to be paid); the drawee bank (the bank where the maker has an
account and his balance is held); the amount in writing and in figures; the maker (the
person who writes the check and owes the debt); and the date.

Check Clearing -- The process of sending checks through the nation’s banking system
for delivery to drawee banks for final payment against the maker’s checking account.

Clearinghouse -- A place where clerks from each bank meet each day to exchange checks
drawn on their respective banks. When the clerks leave the clearinghouse, they take only
those checks drawn on their own banks.

Collateral -- Property pledged by a borrower as security for payment of a loan.

Collected Funds -- Amount, usually in the form of checks, deposited in the bank for
which funds have been received.

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Common Stock -- A security that represents ownership in a corporation. Holders of
common stock exercise control by electing a board of directors and voting on corporate

Corporation -- Legal entity, chartered by a state with officers and stockholders, for the
purpose of doing business for profit.

                                              Teaching Strategies for Financial Services

Coupon -- A promissory note attached to a bond that can be detached at maturity and
deposited into a bank. Coupons show a due date and the amount to be paid. Some
coupons must be sent in for collection. Supervisor approval for immediate credit is
usually required on deposits consisting of coupons.

Credit -- A credit decreases assets (loans receivable and accounts receivable) and
increases liabilities (deposit accounts payable and accounts payable).

Credit Card -- A card used to borrow money or buy goods on credit: usually a revolving
line of credit.

Credit Union -- Non-profit membership organization offering many of the same services
as banks or savings and loans.

Cross Selling -- The offering of a variety of financial services to customers.

Customer Satisfaction -- the fulfillment of a business patron’s needs.

Data Processing -- The manual or electronic posting of all daily transactions.

Death Certificate -- A legal document that certifies a death.

Debit -- A debit increases assets (loans receivable and accounts receivable) and decreases
liabilities (deposit accounts payable and accounts payable).

Decedent -- A person who is deceased (dead).

Demand Deposit Account (DDA) -- Funds in checking account are demand deposits,
payable on demand to the depositor or to his/her order. These accounts are liabilities on
the bank’s Balance Sheet, because the bank owes the balance of the funds to the customer.

Deposit -- Funds in the form of cash or checks that are credited to an account and
increases the account’s balance. It is the credit portion of a teller transaction, because it
increases the liability (deposit accounts payable) of the bank.

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Depository Bank -- The bank where the depositor has an account. The first bank to
which an item is transferred (deposited) for collection, even if it is also the payer bank, or
drawee bank. Example: both the payee, Susie Ruthie and the payer, Bobbie, have
accounts with Interstate Bank.

                                              Teaching Strategies for Financial Services

Direct Deposit -- A process that credits a customer’s account directly without the use of a
check. Payroll and social security payments are examples of direct deposits, sometimes
called SurePay.

Discount Rate -- The interest rate at which the Federal Reserve lends reserve money to
commercial banks.

Dishonor -- To refuse to pay a check upon presentation, because of a deficiency caused
by the maker, such as insufficient funds in an account.

Dividend -- Payment by a corporation to a shareholder as a return on the shareholder’s

Double Entry Accounting -- A method of accounting by which each transaction must be

Draft -- A draft is a signed written order that is payable through a specific bank. The
words “Payable through” or “Payable at” determines any draft.

Drawee Bank (Payer Bank) -- The bank to which an item is payable as drawn or
accepted. The maker of a check has an account at the drawee bank.

Drawer -- The person who writes a check; also referred to as the maker of a check.

Dual Control -- A security system in which two or more persons must simultaneously
perform a duty or transaction. Dual control is always used to open and validate bank by
mail, night drop and ATM deposits.

EE Bonds (Series EE Bonds) -- A bond offered by the United States government to the
public. The government authorizes banks and other financial institutions to act as agents
to process the applicant’s purchase of EE bonds and to redeem EE bonds. Earlier issue
(E Bonds) may be presented for redemption but can no longer be purchased.

Electronic Data Processing -- The process of sorting, classifying, identifying, recording
and summarizing data through the use of computer systems.

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Embezzlement -- The fraudulent misuse of company funds by an employee or the misuse
of a depositor’s funds by a bank employee.

Encode -- The imprinting of Magnetic Ink Character Recognition (MICR) characters on
documents. Checks and deposit slips are encoded to allow the computer to “read” the
routing and transit numbers, the account numbers and the dollar amounts.

                                              Teaching Strategies for Financial Services

Endorsement -- The payee’s signature on the back of a check which shows that the payee
has received payment for the item either in cash or credit.

Estate Account -- A bank account into which funds belonging to the estate of a deceased
person have been deposited.

Exchange Rate (Currency) -- The rate used to exchange one country’s currency with
another country’s currency.

Exchange Rate (Checks or Drafts) -- The rate used to exchange one country’s checks
and drafts with another country’s checks or drafts.

Executor -- An individual or bank name in a will whose function it is to distribute the
funds and property in an estate to the rightful heirs.

Federal Deposit Insurance Corporation -- An independent executive agency of the
United States’ government which guarantees a depositor’s account balance up to
$100,000.00 (per ownership type) against loss due to failure of the institution.

Federal Reserve System -- The central banking system in the United States. It consists
of twelve main Federal Reserve Banks. Each bank operates within a geographic district.
A seven member Board of Governors, appointed by the President of the United States,
governs the activities of the entire system.

Fiduciary -- Relationship that involves one member to hold something in trust for

Float -- The amount of money represented by checks deposited to an account that the
bank has not actually received from the drawee bank.

Foreign Currency -- Paper money issued by a foreign country.

Guardian -- An individual appointed by a court to administer the affairs of another
person, usually a child or someone who is incompetent.

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General Ledger -- A bank’s books shows its assets, liabilities, capital, expenses and
income. The daily statement of condition is prepared from these records.

Heir -- A person who is legally entitled to the property and money of a deceased person.

                                              Teaching Strategies for Financial Services

Hold -- A restriction for all or part of a customer’s account balance. Specific funds holds
are placed on accounts by tellers when cashing checks. Uncollected funds holds are
placed on checks deposited into an account or checks drawn on other banks that are
cashed by “our” customer or deposited into an account.

Individual Account -- An account in the name of one person (single owner).

Insider Information/Trading -- Stock transaction completed because of secret
knowledge given by an inside source to the investor.

Insurance -- To eliminate economic risk

Interstate -- Within an individual state’s boundaries

Intrastate -- Across state boundaries

Joint Account -- An account in the names of two or more people. Joint Tenants with
Rights of Survivorship is the most common type of joint account.

Kiting -- A scheme to defraud banks by falsely inflating the balances in two or more

Liabilities -- Financial obligations on a Balance Sheet. Liabilities decrease wealth.

Line of Credit -- An agreement by a bank to extend credit to a customer to a
predetermined limit. Two types of credit lines are:
1.     Installment loans with a predetermined monthly payment until the loan is paid in
       full. Example: Automobile loans. Once the loan is paid in full, an individual
       needs to reapply for additional credit.
2.     Revolving Line of Credit is a line of credit that is reusable as it is repaid.
       Example: Credit cards.

Loan -- A contract between a lender and a borrower. The borrower signs a promissory
note agreeing to pay back the funds over a specified period of time, at a specified rate of

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Maker -- The person who writes a check or signs a note; the person who promises to pay
an obligation when due.

Maturity Date -- The date when a note or other obligation becomes due and payable.
Also, the date a Certificate of Deposit’s term has ended.

                                              Teaching Strategies for Financial Services

Member Bank -- A bank that is a member of the Federal Reserve System. This includes all
national banks and any state banks that wish to join.

Money Order -- A type of official check sold by banks, post offices and retail outlets.
There is a charge for purchase of a money order. There is a dollar limit, usually $1,000.00
on money orders.

Mortgage -- A legal document pledging property, usually real estate, as security for a
loan. The mortgage is only a document; the loan, itself, is a mortgage loan, though in
common use, the work “mortgage” often refers to the loan.

Mutual Savings Bank -- A bank that is owned by its depositors and accepts savings
deposits. There are 500 mutual in the United States; most are located in New England and
New York. In modern operations, mutual offer personal checking accounts, NOW
accounts and savings accounts. Many make personal loans, though the bulk of their
lending is for first home mortgages.

National Bank -- A commercial bank with a federal charter.

National Credit Union Administration (NCUA) -- The federal agency that supervises
federal credit unions and insures depositors’ funds in federal credit unions and covered
state-chartered credit unions.

Negotiable Instrument -- An unconditional written order or promise to pay money,
which can be transferred from one person to another. A check is the most common form
of negotiable instrument.

Negotiable Order of Withdrawal Account (NOW) -- An interest bearing checking
account for personal use that may be offered by both thrift and commercial institutions.

Night Depository -- An after-bank hour’s depository service for customers. Deposits are
inserted into a large receptacle on the outside of the bank and drop into a vault inside the
bank. Bank employees open the depository vault each morning using dual-control,
process the transactions and mail receipts to the customers.

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Notary Public -- An official permitted by the state to attest and certify to the authenticity
of documents. An official seal is placed on the document and the notary affixes his/her

Note -- A legal document that is evidence of a debt and the promise to pay the debt to the
lender on a specific date.

                                       Teaching Strategies for Financial Services

Not Sufficient Funds (NSF) -- The term used for insufficient funds to pay a check when
it is presented for payment to the drawee bank.

Outstanding Check -- A check that has been written and issued by the owner, but has not
yet gone through the financial process to be paid by the bank it is drawn on.

Partnership -- A for-profit association with two or more people co-owning the business.

Payee -- The person or business to whom a check is “Made Payable.” The check payee
must endorse the back of the check in order to negotiate or transfer it.

Personal Identification Number (PIN) -- A customer’s secret identification number
used to access the automated teller terminal (ATM) or to access his/her account at a point-
of-sale merchant (POS).

Point-of-Sale -- A process that enables a bank’s customer to make specific transactions at
a retail outlet: supermarkets, retail stores, gas stations. The debit is immediately applied to
the customer’s account; the credit is immediately applied to the merchant’s account.

Power of Attorney -- A legal document authorizing a person to act as an agent for
another person.

Preferred Stock -- An equity security that represents ownership in a corporation. It is
issued with a stated dividend, which must be paid before dividends are paid to holders of
common stock. It generally carries no voting rights.

Prime Rate -- The interest rate charged by a bank to its best and most credit worthy

Proof Department -- The department that sorts, proves (balances) and distributes checks
and other items coming into the bank, either from tellers, clearinghouses or other banks.
The dollar amount is encoded on each item (credits and debits) during this process.

Real Estate -- Land owned as property, along with natural resources and permanent
buildings on it.

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Return Items -- A check that is returned unpaid by the drawee bank. Common reasons
that a check would not be paid would include: not sufficient funds, uncollected funds,
account closed, missing or incomplete endorsement or stop payment.

Revolving Loan -- Loan balance fluctuates as payments are made and more loans are
taken out.

                                        Teaching Strategies for Financial Services

Right of Survivorship -- The right of one individual to take full possession of specific
assets upon the death of the co-owner. Joint Tenants with Right of Survivorship
(JTWROS) is the most common use of phrase.

Risk -- Possibility of suffering harm or loss; the amount an insurance company stands to
lose; one considered with respect to the possibility of loss to an insurer.

Routing Symbol -- The number on every check that designates the path the check will
take in order to be presented to the drawee bank.

Safe Deposit Box -- A small locked box within the bank vault, rented by a customer for
the storage of valuables and documents. An annual fee is charged and nobody has access
to the box except the customer after s/he signs an access card or register.

Safekeeping -- The banking service where the bank issues a receipt for, maintains a
record of, and provides vault facilities for a customer’s property. Also, the practice of
sorting canceled checks at the bank rather than returning them to the customer.

Savings Account -- An interest bearing account used by the customer to accumulate
funds for various purposes. Savings accounts have no fixed maturity dates. Banks may
require a 30 day written notice before allowing withdrawals, but generally do not enforce
this provision of the law.

Savings and Loan Association -- A federally or state chartered thrift institution that
accepts various forms of deposits and uses them primarily for mortgage loans. Depositors
of these institutions are insured against loss by the Federal Depository Insurance
Corporation up to $100,000.00 per ownership types.

Savings Bank -- A thrift institution specializing in savings accounts, but also offering
other forms of deposits.

Savings Certificate -- A written instrument for the deposit of a stated sum of money. The
rate of interest and maturity date are specified. The certificate must be surrendered to the
bank to obtain these funds. Penalties apply for early withdrawal.

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Secured Loan -- A loan secured with collateral; such loans are often made at lower rates
of interest than unsecured loans.

Service Charge -- A fee charged by a bank for services rendered to a depositor or other

                                        Teaching Strategies for Financial Services

Share Draft -- A check-like instrument issued by the customers of a credit union, drawn
against the deposit balance at the institution and used as a payment medium.

Signature -- A sign/mark made by the drawer/maker of a negotiable interment.                   A
signature may include marks, thumb prints, and be printed, typed or stamped.

Signature Card -- A bank’s record showing the signature of the person or persons
authorized to sign a check. It is a legal document showing ownership of the account and
tax withholding statements of certification.

Sole Proprietorship -- Business owned by one person.

Statement -- A written summary of all banking transactions for an account during a
certain period of time, usually one month, that is prepared by a bank for the customer.

Statement of Condition -- A detailed listing a company’s assets, liabilities, capital and
net worth as of a specified date. The major statement issued is the year-end statement.

Stock -- Shares of ownership sold by a corporation for the purpose of raising capital.

Stock Exchange -- A place where brokers meet to buy and sell stocks and bonds
according to fixed regulations.

Super Now Account -- An account authorized by the Depository Institutions
Deregulation Committee that is similar to the money market deposit account. It is not
available to corporations. There is a limit to monthly transactions; it is an interest bearing
checking account with a set monthly fee and service charges for the number of deposits
and debits processed in each statement cycle.

Tenants in Common -- The holding of property by two or more people in such a manner
that each has an undivided interest in the property. At the death of one account owner, the
property passes to the heirs and not to the surviving signers on the account. Checking
accounts held as “Tenants in Common” require the signature of all owners to negotiate
checks. The word “AND” appears in the title of the account.

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Title -- The coincidence of all the elements that constitute the fullest legal right to control
and dispose of property or a claim; the instrument constituting this evidence; as a deed.

                                              Teaching Strategies for Financial Services

Transaction Code -- A numeric code imprinted on either debits or credits to give
instructions to the computer regarding this particular item. Sometimes referred to as a
“Tran Code.” A force-pay Tran Code on debits instructs the computer to pay this item
first, disregard holds or stop payment, and to pay it even if it overdraws the account. Non-
sufficient charges would have a force-pay on it in order to overdraw the account.

Transit Check -- Any check that is not drawn on the bank where it is being deposited.

Travel’s Checque -- Special checks sold at financial institutions to customers who plan
to travel. This form of Checque provides safety in that if it is lost or stolen, the traveler is
able to be reimbursed for the loss or theft.

Truth-In Savings (TISA) - Federal and/or state laws that require financial institutions
provide consumers with complete information regarding the terms and conditions relating
to savings accounts.

Uncollected Funds -- The dollar amount of deposited or cashed items that are in the
process of collection from the drawee banks.

Uniform Commercial Code -- The body of laws, adopted in part or entirety by all states,
governing various types of financial transactions.

Uniform Fiduciaries Act -- The government statute that applies directly to fiduciary or
trust accounts. It provides guidelines on the type and extent of required documentation
for fiduciary accounts and policies in regard to the security of these accounts.

Uniform Gift to Minors Act -- Legislation that allows individuals who make irrevocable
gifts of money or other property to underage beneficiaries to claim a tax relief.

Will -- A legal document that gives specific instructions for the disposition of a deceased
person’s property.

Withdrawal -- An order, signed by the owner of an account, to take a sum of money from
his savings account in the form of an official check, as a debit transfer item, or cash.
Savings withdrawals are not negotiable instruments.

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