Banking has its own vocabulary. When you open a checking account, fund a certificate of deposit or apply for a loan among other financial activities, you will be exposed to the language of banking.

When dealing with money it is important to use the correct terminology to communicate more clearly. Over time, literally billions of financial transactions have caused specific words to have specific meanings.

Here is a list of some of the most common terms, taken from the American Bankers Association's definitive dictionary, Banking and Finance Terminology.

Banking Dictionary

Annual Percentage Rate (APR)
This measures the cost of credit expressed as a yearly interest rate. It is intended to provide a single value for a consumer to compare cost of credit between one lender and another.

Cash advance
A cash loan obtained by a cardholder through presentation of the card at a financial institution, ATM or through a mail request.

Certificate of deposit (CD)
A formal receipt for funds left with a bank as a special deposit. Such deposits may bear interest, in which case they are payable at a definite date in the future or after a specified minimum notice of withdrawal; or they may be non-interest-bearing, in which case they may be payable on demand or at a future date. These deposits are payable only upon surrender of the formal receipt, properly endorsed.

Collateral
Property pledged or assigned by a borrower to protect the interests of the creditor; the creditor may take ownership of the pledged property in case of default.

Credit rating
A formal evaluation of an individual's loan-repayment history or potential.

Credit report
A factual data report from an independent agency that verifies the applicant's current employment and income, and provides information on current and previous debts and liabilities.

Debit card
A plastic card enabling the cardholder to purchase goods and services or make cash withdrawals, the cost of which is immediately charged to his or her bank account.

Finance Charge
The “cost” of credit. Finance charges include: interest, transaction fees, and service fees. Interest is the charge for lending money or extending credit.

Grace period
A formally specified extension of time beyond a payment due date.

Lien
A legal claim or attachment, filed on record, against property as security for payment of an obligation. A lien is the guaranteed right of a lender or investor to specific property in case of default.

NSF / Overdraft
The amount by which a debit or charge against an account exceeds the balance of the bank account, non-sufficient funds.

PITI (Principal, interest, taxes and insurance)
Principal, interest, taxes and insurance. The components are commonly included in a monthly mortgage payment.

Principal
The amount of money owed upon which interest in charged.

Refinancing
The retirement of existing securities, or the repayment of a debt from the proceeds of new borrowings.

Secured loan
A loan against which a tangible asset has been pledged in case of default on the loan, a loan backed up with collateral.

Term / Repayment Period
The amount of time specified in the contract that you have to repay your obligation.

Unsecured loan
A loan that is not backed up by collateral.

Yield
The annual percentage rate of return on capital, calculated by dividing annual return by the amount of an investment.