Banking Terms

Banking Terminology

The banking industry employs a diverse set of terms and terminologies, or the fundamental banking terms or banking terminology. For instance, while we are all familiar with the “account balance”, it refers to the sum of money present in any account in banking terms. 

Banking terminology is essential for every finance student to know and understand, not only for banking and finance exams but also for practical knowledge. Understanding these makes it easier to navigate the banking world. Knowing the basic banking terms and finance, as well as the words used to describe them, can lead to significant improvements in your bank balance. 

Basic Banking Words

Basic banking words contain terminologies that are often used and should be known to even beginners.

Base Rate

A bank loan can be obtained at a rate of interest obtained on a loan. The base rate seems to be the lowest interest rate that banks can charge their customers. In other words, they are not permitted to charge less than the base rate. Therefore, banks set interest rates based on the base rate, whether for education or a home loan.

Cashback

A cashback is a cash incentive offered by banks or retail stores to credit card customers in exchange for any purchases made with the credit card. A cashback is typically a small percentage of the total spending on the credit card, ranging from 1% to 5%.

Collateral

Collateral is any valuable asset that a borrower offers to a bank in return for a loan, like property, gold, or securities. Collaterals have been used for secured loans and thus are advantageous to any lending institution. If the debtor fails to make payments on their loan, the lending institution can immediately sell or auction the collateral.

Compound Interest

Simple interest is purely the rate charged by a lender on your deposits; compound interest is the interest paid on the money deposited plus the interest that has already accrued on the deposit. Compound interest is much more advantageous because it chooses to follow the concept of investing the money upon the original principle rather than withdrawing it.

Demat Account

A Demat account is an abbreviation for a dematerialised account, which describes the physical shareholdings certificate of security. Dematerialized refers to all owned securities that have never had physical certificates issued to a shareholder and are only available electronically.

Electronic Fund Transfer

It is an electronic or digital method of transferring funds between parties that employs electrical gadgets such as ATMs, computer systems, or mobiles. It can help with money transfers between accounts for the same or distinct banks.

Fixed and Floating Rate

When you obtain a loan from a bank, the loan balance is allocated to you for a set term of the loan and interest rate. A fixed-rate loan is one where the rate of interest specified remains constant throughout the loan’s term. On the other hand, a floating rate is one in which the rate of interest is evaluated and modified regularly throughout the tenure based on the most recent applicable interest rate.

Plastic Money

This term is used by online banking that wants to conduct any type of cashless financial transaction. In general, plastic money pertains to either a Debit card used to withdraw money, make payments, or undertake other account-related transactions or a Credit card issued to qualified customers who can use a post-credit card limit for transactions.

Commercial banks and banking are becoming a requirement in today’s world. Today, banking institutions play many roles, from providing a safe place for your money to providing financial support and services to help you build wealth. 

To maximize the benefits of the multiple options open in the sector, you must first understand banking fundamentals, which includes general knowledge of the terminology used and the banking terms.

Understanding of CIF

The CIF meaning in banking is, however, one common idea that everybody should be aware of. It is crucial in banking terms.

A customer information file or CIF is a digital file that contains all necessary details about a user’s personal and account information. It includes a CIF number, enabling the company to see the customer accounts by relationship rather than account type. Although customer files exist in many industries, CIF meaning in banking has long been regarded within the financial sector. 

Conclusion

Some of the important banking terms are covered that give a person a broad understanding of banking. CIF has its own key takeaways. A customer information file is a computerised file used by businesses to store personal and account information about their customers. A CIF in banking includes credit card, account information, the amount and types of various accounts owned, and so on. CIFs are also created by online retailers for existing and prospective customers based on online search results or purchases.