US Banking Terms and Terminology

The US has one of the most complex banking systems in the world. The banking system is regulated by many authorities, one of which is the Federal Reserve System. There are many complex terms used in the system. In this article, we will tell you about the complex banking system of the US and the common US banking terms.

Federal Reserve System

In the United States, the Federal Reserve System regulates the bank holding companies, Edge Act Corporations, State-chartered member banks, state-chartered US branches and agencies of foreign banks, and the foreign branches of US national & state member banks. The Office of the Comptroller of Currencies regulates national banks. However, they are to be members of the Federal Reserve System.

The Federal Reserve is the regulator for banking holding companies. Their responsibility is to regulate and supervise several large banking institutions as federal regulators. They only are granted authorization to regulate financial holding companies.

Complex Banking System in the USA

The United States has a complicated regulatory and banking structure. There are several federal and state regulators along with institutions that might have either a state or federal charter. Additionally, the different regulators have different responsibilities depending on the type of financial institution they govern. Let us take a look at the financial industry regulators at the federal level:

Each state has either one or more agencies that have the responsibility to supervise and regulate the state-chartered banks. Let us take an example of the state of California. The Department of Financial Institutions regulates their financial institutions. The state and federal regulators have the responsibility of several banking activities and institutions.

Common US Banking Terms

Being a bank customer and handling daily financial transactions can expose you to fundamental banking words as well as a lot of financial jargon. Here are a few banking phrases you should be familiar with if you want to be more knowledgeable about your finances. Many terms used in the United States banking system are complex, but there are several terms that are used regularly. Let us take a look at the most common US banking terms.

Account name – It is the actual name of the entity or the individual on the bank account. All of their accounts are named “Trustees of Indiana University” in the financial institutions. A form of financial asset or debt that is kept and owned in your name. As an account holder, you have specific rights and duties when you open a bank account, whether it’s a checking account, savings account, CD, or money market account.
Automated Clearing House (ACH) – The Automated Clearing House (ACH) is a nationwide electronic payments transfer system that connects banks, corporations, and individual consumers. ACH payments are used by banks to transfer funds between them. When you sign up for direct deposit at work, the money is usually deposited into your bank account via ACH.
Bank codes – A bank code is a three-letter code that is used to identify the banks on the Bank Code List. In international money transfers, codes are used to identify individual banks and branches, ensuring that your funds reach their destination. International wire transfers and messages are processed by banks using these codes.
Bounced check – A bounced check is one that was returned to the depositor. This is because the account did not have sufficient funds to pay the amount stated on the check. Some people use their bank’s online bill pay tool to issue paper checks, while others use their bank’s online bill pay feature to issue electronically produced checks.
Beneficiary – A beneficiary is an entity or an individual at the receiving end of a fund transfer. Any person who obtains an advantage and/or earns from anything is referred to as a beneficiary. A beneficiary in the financial sector is someone who is entitled to receive distributions from a trust, will, or life insurance policy.
Correspondent bank – A correspondent bank is a financial institution which offers several services to other banks. A correspondent account is one set up by a bank to receive deposits from, make payments on behalf of, or handle other financial operations for another bank. Bilateral agreements between the two banks are used to establish correspondent accounts.
Currency code – A currency code is a three-letter code that represents a particular country’s currency. For example, the currency code for the United States is USD.
Cancelled check – A cancelled check is a check that has been paid. It is generally used as legal proof for payment. Any cheque that has been crossed with two lines and the word “cancelled” written across it is a cancelled cheque. It serves as verification that the individual has a bank account. You do not need to sign or write anything on the check aside from that.
Checking account – A checking account is a type of deposit account. Customers can deposit funds and withdraw available funds when they want. They can withdraw funds by the use of a debit card or by writing a check. Sometimes these accounts bear interest.
Credit card – A credit card is issued to a person allowing him/her to use the card to purchase services and goods on credit. For credit cards, there is a set credit limit that allows you to use. If the limit has been reached, transactions could be declined by the bank.
Depository bank – A depository bank is a financial institution that accepts electronic funds and incoming paper and credits them to the beneficiary bank account. It keeps the assets on the customers’ behalf. One example is a retail bank.
Domestic transfer – A domestic transfer is when there is a fund transfer, and the receiving bank is located within the same country.
Digital wallet – A digital wallet is used to store debit and credit cards. You can use this to make purchases online or at participating retailers.
Debit card – A debit card is a plastic card that deducts money directly from the bank linked to the card. It is generally used to pay for any services or goods. A debit card can be used anywhere. MasterCard or Visa debit cards can be used anywhere and with no interests. You can also use a debit card to withdraw cash from the ATM.
Electronic fund transfer – An electronic fund transfer is a transfer that is made by electronic means. It can be made by a computer, ATM, telephone, magnetic tape, or an electronic terminal.
Federal Reserve System – It is an independent institution of the United States government that has a central and major role in the regulation of financial institutions, domestic payment systems, and monetary policies.
International transfer – An international fund transfer is a transfer where the funds are sent to a bank outside the country. An overseas wire transfer should normally arrive between 1-5 business days if you request it before your bank’s cut-off date. Receiving an international wire transfer can take a long time in some situations, but we’ll get into that later.
Interest rate – The amount of interest that is due per period is the interest rate. In other words, it is the percent of the interest paid on an account that bears interest. The types of interest-bearing accounts are: savings accounts, some checking accounts, and CDs. It is also the percentage that is charged on a line of credit or loan.
Joint account – A joint account refers to a bank or brokerage account that is shared by two or more people. Relatives, couples, or business partners that are familiar with and trust each other are the most likely to use joint accounts. It usually gives everyone named on the account access to the money in it.
Minimum balance – A minimum balance is the lowest balance in an account through a statement cycle. Banks often require accounts to have a minimum amount kept in at all times. You are required to maintain this balance to avoid any charges to your bank account.
Online banking – It is a service that allows people to open bank accounts, obtain account information, transfer funds, and control the account online through their mobile or computer. Online banking, often known as internet banking, online banking, or home banking, is an electronic payment system that allows bank or other financial institution customers to execute a variety of financial transactions through the institution’s website.
PIN – A PIN, or personal identification number, is a unique number that you have to enter in order for you to access your bank account when you purchase something with your debit card or when you use an ATM. It is a number that is to be kept confidential as it gives access to your bank account.
Savings account – A savings account is where one keeps the money they do not wish to spend in order to earn interest. It is a depository account that earns high interest. You are only permitted to make a total of six transfers per month with this account. This can be for payments, telephone transfers, or point-of-sale transactions. But note that the interest earned is taxed as earned income.
Wire transfer – A wire transfer is an electronic payment to transfer funds from one entity or individual to another.

These terms are the most common in the US banking system, and it is essential that you know the basics.

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