Understanding Common Terms in Bank Statements
Bank statements are filled with financial terms and acronyms. Here's a detailed guide to help you navigate these terms:
Account Information
- Account Balance
- Current Balance: Total amount in your account at statement closing.
- Available Balance: Funds available for use, accounting for pending transactions.
Types of Transactions
- Deposit: Funds added to your account.
- Withdrawal: Funds removed from your account.
- Transfer: Moving funds between accounts or individuals.
- Direct Deposit: Automated deposit of funds, such as salaries.
- ACH (Automated Clearing House): U.S. network for electronic financial transactions.
- Wire Transfer: Electronic transfer via networks like SWIFT or Fedwire.
Fees and Charges
- Overdraft Fee: Charged when expenditures exceed account balance.
- Monthly Maintenance Fee: Regular charge for account services.
- ATM Fee: Fee for using non-affiliated ATMs.
- NSF Fee (Non-Sufficient Funds): Charged for bounced checks due to inadequate funds.
- Foreign Transaction Fee: Fee for transactions in a foreign currency.
Interest and Rates
- Interest Earned: Amount gained in interest-bearing accounts.
- APY (Annual Percentage Yield): Yearly earned return rate on deposit accounts.
- APR (Annual Percentage Rate): Yearly interest rate for borrowing.
Other Common Terms
- Statement Date: Date when the statement was generated.
- Closing Balance: Account balance at the end of the statement period.
- Minimum Balance Requirement: Minimum amount to avoid fees or qualify for interest.
- Routing Number: Nine-digit code identifying your bank in transactions.
- Ledger Balance: Balance including all posted transactions, excluding pending ones.
- Overdraft Protection: Service to cover overdrafts, usually with a fee.
Acronyms
- CD (Certificate of Deposit): Savings certificate with a fixed maturity date.
- IRA (Individual Retirement Account): Retirement savings account with tax advantages.
- FIFO (First In, First Out): Accounting method for assets and inventory valuation.
- LIFO (Last In, First Out): Alternative accounting method for valuing inventory.
Understanding these terms can significantly enhance your ability to manage your finances and interpret your bank statements accurately.