Glossary of Financial Terms
An amount charged the customer as a penalty for not making a payment within the specified amount of grace days after
the due date.
The portion of a bank's demand and time deposits that must be kept in the form of cash or acceptable equivalents for
depositors' protection. Fed member banks maintain these reserves with the Fed in their district; others either use the Fed
directly or use a correspondent bank that is a Fed member.
Letter of Credit
An instrument or document issued by a bank guaranteeing the payment of a customer's drafts up to a stated amount for a
It substitutes the bank's credit for the buyer's and eliminates the seller's risk.
A Commercial Letter of Credit is normally drawn in favor of a third party, called the beneficiary.
Anything owned by a bank, individual, or business. A bank's largest liability is the sum total of its deposits.
Line of Credit (LOC)
A maximum amount of credit allowed by a bank for a customer. The customer may draw money at any time up to a
pre-determined limit set by your bank for revolving or non-revolving line of credit.
A business transaction between two legal entities. One party, known as the lender, agrees to lend funds to the second
party, known as the borrower. The funds may be used with or without fee. This fee is called interest.
Loans may be demand (due on demand) or time (due back over a certain period of time), depending upon the agreement as
to maturity. They may also be secured (backed by collateral) or unsecured (not backed by collateral).
Loans may be short term loans or long term loans. Short term loans are evidenced by a promissory note, a trade
acceptance, or other type of negotiable instrument. Long term loans are evidenced by bonds, mortgages, debentures, chattel
mortgages, lease agreements, or other certificates of indebtedness.
Local Area Network (LAN)
The networking of computers that permits a number of operators in a building or area to communicate and to share such
devices as memory storage units or printers.
Deposited checks drawn on other banks within the same geographic area or city.
A banking service that encodes bills/coupons and accepts them for processing customer payments.
- Get your records straight. First Central Savings Bank offers comprehensive Lockbox Services.
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