Online Banking has grown in popularity over time. With increased use comes increased need to understand the banking terminology. The "do-it-yourself" nature of online banking requires a deeper understanding of banking concepts than using a brick and mortar bank, as the client does not have a teller to assist her. Having a clear understanding of banking language provides confidence when banking online.
Online Banking
Online banking allows a variety of options. You can do business day or night. You are no longer dependent on the hours printed on the door of your brick and mortar bank. You can transfer funds and pay bills at your convenience. Online banking allows you to easily check account balances, verify check cashing, and view deposits and withdrawals. It helps protect you from fraud by making it easy for you to stay on top of your account activity.
Optimize your online banking experience, services and savings by understanding the terms and definitions.
Understand the definitions of online banking to maximize your savings and services.
FDIC
Most banks insure deposits through the Federal Deposit Insurance Corporation (FDIC). The FDIC is an independent federal agency that insures accounts up to certain limits. They are the safety net if a bank becomes insolvent.
New Deposit Insurance Limits - The standard insurance amount of $250,000 per depositor is in effect through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except IRAs and other certain retirement accounts, which will remain at $250,000 per depositor.
SIPC
The Securities Investor Protection Corporation (SIPC) is a nonprofit organization established by Congress in 1970 with the passing of the Securities Investor Protection Act. Its function is similar to the FDIC as the SIPC is the safety net if a brokerage firm fails. SIPC will also pay up to $100,000 on cash or cash equivalent accounts. SIPC does not shield a consumer against market risk.
Wire Transfer
Wire Transfers occur when you order your banking institution to make payments electronically by wire or telephone. Wire transfers usually involve large sums of money. This is not to be confused with an EFT (Electronic Funds Transfer) which is a transfer of funds initiated through a computer, telephone etc that allows a financial institution to debit or credit your account.
Bill Pay
Bill pay is a perk enjoyed by online banking clients. Bill Pay allows an individual to perform electronic funds transfers to pay bills online. It can be configured to pay on demand, where the client manually triggers the EFT. It can also be configured to trigger regularly scheduled EFTs automatically.
APY
APY, or Annual Percentage Yield, is the amount of interest earned shown as a percentage rate your account would earn in a year based on a stated interest rate. A typical APY disclosure statement would mention that the funds need to stay deposited for a full 365 days at the advertised rate and no additional deposits or withdrawals are made during this period.
APR
APR, or Annual Percentage Rate, is the cost of credit in a consumer loan, such as a mortgage. As with the APY, the APR is expressed as a percentage rate. The APR is the finance charge you pay, including loan interest, points and origination fees.
Direct Deposit
Direct Deposit is the act of having funds deposited directly into your account without the delay of waiting for a paper check to bring to the brick and mortar bank. Direct Deposit is most often used for payroll and tax returns.
Overdraft Protection
Overdraft Protection allows a check you have written to be honored even if your account has insufficient funds. There is usually a cost associated with this benefit.
Online banking is an efficient way to conduct day-to-day business. Understanding the terms will help you become familiar with the most common uses of online banking.