Bank Terminology

Introduction

Banking can be defined as the economic activity of receiving and protecting money owned by other people and businesses and then lending it out to execute financial activities such as creating a profit or merely covering operational costs. Even for industry specialists, banking terminology and concepts are numerous and can be difficult to understand at times. Being a bank customer and handling daily financial transactions can expose you to fundamental banking words as well as a lot of financial terminologies. However, because banking is such an important aspect of our professional and personal lives, it is beneficial for consumers to understand some basic banking concepts.

Bank Terminology 

The adequate knowledge of banking concepts relies heavily on the use of banking words. Banking terminology can help you grasp the Reserve Bank of India’s (RBI) monetary policy changes and the government’s economic policies. For day-to-day use, it is critical to understand these terminologies. Some of the important bank terminologies are:

ATM

Automated teller machines (ATMs) are the kind of machines that allow you to execute electronic bank transactions. One important such activity is withdrawing money from bank account.The ATMs are a great example of how computers and electronics have been integrated into the banking industry.

NEFT

National electronic fund transfer is an automated money transfer system that allows you to send funds from one bank to another or from one branch to another. NEFT costs and also the bare minimum, which can be transferred, differ depending on the bank.

CashBack

Cashback is a type of offer made mostly by credit card companies, in which they reimburse the cardholder for money spent on the card. Points will be awarded for every dollar spent on the card, and the point can then be redeemed for cash. 

Credit History

A customer’s credit history is their previous loan-related behaviour patterns. A credit agency will gather a customer’s information and convert it to a figure from 300 and 900. This is your credit score, and the higher it is, the more likely you are to get approved for loans or a credit card.

Balance Transfer

For people who have many credit cards, this is a card payment alternative. Balance transfer would be when you shift the amount of one bank card to another, as the name suggests. This is advantageous if a cardholder is unable to pay off his or her card in full or if the second card has a lower interest rate.

Fixed Rate

A fixed rate is when the interest rate on loan remains consistent for the duration of the loan.

Floating Rate

A floating rate is the polar opposite of a fixed rate. It refers to interest rates that fluctuate over the life of the loan. These interest rates fluctuate in tandem with the economy’s interest rates. 

KYC

KYC (Know Your Customer) is a process that all banks must go through to verify a customer’s identification. This is to verify that there are no fraudulent transactions in the bank.

Mobile Banking 

Using a mobile phone to access banking services is known as mobile banking.

Debtor

A debtor is a person or business that owes money to a bank or other financial institution.

Joint Account

A joint bank account is one in which partners share the same rights and responsibilities of a specific account.

Bank Rate

The Bank rate is the interest rate that the RBI charges banks when they borrow money.

Compound Interest

This is the interest that accumulates over time. Interest that is applied to both the original deposit and any new interest earned. For example, if we deposit ₹1000  in an account that offers 5% compound interest per year, you will receive 5% on ₹1005 the following year. On ₹100, non-compounding interest would give 5%.

Savings Account

An interest-bearing account is typically used to store funds for short- or long-term objectives or emergencies. You can make deposits at any time, although certain transfers may be restricted to six months.

Conclusion 

We live in a world where life without a bank is impossible. So understanding the meaning of the words that are very commonly used in the bank’s dictionary is vital as not only it increases our knowledge but makes our visit to a bank hassle-free. These words come up in any form while dealing with a bank transaction, so knowledge of these terms is always a great idea. The knowledge of these terms makes us more confident for our Bank transactions.