Glossary of Financial Terms
Adjustable Rate Mortgage (ARM)
A mortgage loan that allows the lender to adjust the interest rate periodically to reflect changes in market conditions. Your mortgage payments may adjust up or down as the interest rate changes, in accordance with a stated index and with pre-determined limits (or caps). (Also known as Variable Rate Mortgages.)
The repayment of a mortgage loan with periodic payments of principal and interest, at the end of a fixed period of time.
Annual Percentage Rate (APR)
The interest rate that reflects the actual cost of credit on a yearly basis expressed as a percentage. Because the APR may include points and other costs associated with the loan, it more accurately reflects what you'll be paying, and allows you to compare different mortgages based on actual costs.
Annual Percentage Yield (APY)
The interest rate that reflects the actual interest earned on a yearly basis expressed as a percentage.
An estimate of the fair market value of a home made by a professional appraiser.
Automated Clearing House (ACH)
A computer-based clearing and settlement operation, often operated by a Federal Reserve Bank, established for the exchange of electronic transactions among participating depository institutions. Such electronic transactions can be substituted for paper checks used to make recurring payments, such as payroll checks, loan payments, insurance premiums, etc.
Automated Funds Transfer (AFT)
A transfer of funds from one account or investment vehicle to another using electronic or telecommunications technology.
An agreement that allows for payments to be deducted on a regular basis from the borrower's or buyer's checking or savings account to pay bills or make loan payments.
Automatic Teller Machine (ATM)
Machines that allow the user to perform various banking transactions, including withdrawals and deposits.
Automatic Transfer Service (ATS)
An arrangement that allows funds to be transferred from a depositor's checking account or statement savings account to the same depositor's checking account to cover a check written and avoid overdraft.
Cash drawn from the available credit of your credit card account. There is no grace period for cash advances. Interest accrues daily until the complete balance is paid in full. Transaction fees may apply.
Certificate of Deposit (CD)
A deposit account that cannot be withdrawn from before a specified maturity date without being subject to an interest penalty for early withdrawal.
Fees paid at a mortgage closing. Fees may vary, but some examples include title insurance, attorney fees, appraisal fees, recording fees and taxes.
Property that is used to secure a loan or other credit and that becomes subject to seizure on default. (Also called security.)
The largest amount you can carry as the balance on your credit card. If you exceed this amount an Overlimit Charge may be imposed.
A card that resembles a credit or ATM card, but which debits a transaction account (checking account) with the transfers occurring simultaneously with the customer's purchase. Generally, a debit card may be used at specified automated payment terminals, such as retail stores and gas stations, or at an ATM.
A method of payment, which electronically credits your checking or savings account; most commonly, payroll and government checks.
For each product, Community Bank maintains an up-to-date customer agreement and disclosure statement explaining rates, fees, payment requirements, terms and conditions that apply to that product.
Electronic Fund Transfer System (EFTS)
A variety of systems and technologies for transferring funds electronically rather than by check. Includes Fedwire, ACH and other automated systems.
The value of your home after the outstanding balance of any loans is subtracted. For example, if the borrower's home is worth $100,000 and the borrower owes $60,000 on the mortgage loan secured by the home, the borrower's equity is $40,000 or 40% equity in the home.
Federal Deposit Insurance Corporation (FDIC)
Agency of the federal government that insures accounts at most commercial banks and mutual savings banks. The FDIC also has primary federal supervisory authority over insured state banks that are not members of the Federal Reserve System.
Fixed Rate Mortgage
A mortgage with an interest rate that stays the same for the life of the loan.
When a cardholder makes a purchase or obtains an advance, the transactions may not post for a few days. The charge amount is not added to the balance of the account until the transaction does post. The time between purchase and posting is referred to as the float.
If payment of the new balance is received in full by the payment date, no additional finance charge will be imposed on the purchase portion of that new balance during the billing period. There is no grace period for cash advances.
The amount the lender charges to lend money, or the amount the bank pays on deposited funds.
Reflects what the bank charges a customer for borrowing money. Commonly referred to as Annual Percentage Rate (APR).
IRA (Individual Retirement Account)
A personal retirement account, which allows the individual to defer taxes on earnings until withdrawn. Also, certain contributions may be tax deductible in the tax year for which they are made.
If payment of the total minimum due is not received by the payment due date, a late charge may be imposed.
Minimum Finance Charge
If your account is subject to a finance charge, a minimum finance charge may apply. Please refer to your customer agreement and disclosure statement for the minimum on your specific credit card account.
Minimum Monthly Payment
A minimum payment based on the percentage of your outstanding balance or a minimum fixed amount. Please refer to your Customer Agreement and Disclosure Statement for the payment required for your specific credit card account.
Monthly Finance Charge
Calculated on the statement closing date by multiplying the average daily balance on the account by the monthly finance charge rate. The monthly finance charge rate is calculated by dividing the annual percentage rate by 12.
The fee charged by a lender to prepare all the documents associated with your mortgage.
The amount you owe on your credit card. This is the balance used to calculate payments and on which interest is charged.
Overdraft privilege is a service to help you prevent bounced checks and overdrafts on your checking account.
Personal Identification Numbers (PINs) are secret numbers that customers use to access their accounts via ATMs.
POS (Point of Sale)
Terminals that allow you to pay for retail purchases with your debit card.
A conditional commitment by a lender based on all standard documentation except a property appraisal and title search.
A process in which the loan officer calculates the housing-to-income ratio and the total debt-to-income ratio to determine an approximate maximum loan amount.
The prime rate is taken from the Money Rates column of The Wall Street Journal, and is base loan rate posted by at least 75% of the nation's 30 largest banks as determined by the Journal. The prime rate is merely a base rate used to make loans to certain borrowers. It is not necessarily the lowest or best rate at which loans are made. (The precise manner in which the rate is determined is in our Customer Agreement and Disclosure Statement.)
The amount borrowed, not including interest.
These are credit card transactions through merchants. Purchases usually have a lower APR than cash advances and there usually are no transaction fees.
Return Check Charge
If payment is made by check and the check is not honored for any reason, a charge will be imposed.
Total Finance Charge
The sum of the monthly finance charge – and any transaction finance charges (or the minimum finance charge, if applicable).
An account that allows transfers to third parties, such as a checking account or negotiable order of withdrawal (NOW) account at a bank or other depository institution.
Transaction Finance Charge
A fee assessed on the date a new cash advance transaction is posted to an account.
Short-term U.S. Treasury security usually issued in minimum denominations of $10,000 and usually having original maturities of 3, 6 or 12 months. Investors purchase bills at prices lower than the face value of the bills; the return to the investors is the difference between the price paid and the amount received when the bills are sold or when they mature. Treasury bills are the type of security used most frequently in open market operations.
Federal law requires that the lender must provide this document to the homebuyer within three business days after loan application. This disclosure gives details of the mortgage payments along with the corresponding APR and finance charges.
Customers are provided with a T.I.S. Disclosure Statement every time a new account is opened, in conjunction with the maturity notice on certain certificates of deposit and upon request for any existing account.
Credit that is not secured with collateral. Customers can qualify for unsecured credit based on their credit history and financial strength.
An interest rate that may fluctuate over the life of the loan. The rate is often tied to an index that reflects changes in market rates of interest. Limits (or caps) are often placed on the level to which the interest rates can vary.
Electronic transfer of funds.