From the ABA Education Foundation

Arranging for a loan – buying a house or car, starting a small business, or opening up a credit-card account – inevitably exposes you to the language of banking.

When dealing with money it's important to use the correct terminology to avoid misinterpretation. Over time, literally billions of financial transactions have caused specific words to have specific meanings.

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

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: 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.

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 hear bank account.

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.

Overdraft: The amount by which a debit or charge against an account exceeds the balance of the trust account.

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

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.

Unsecured loan: Funds loaned with no pledge of collateral or with collateral.

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

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