Glossary

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Account Agreement: An agreement that defines membership eligibility and conditions of your share accounts. It also defines many other important banking operations such as how to order a stop payment on share drafts, transaction limitations on your accounts, overdrafts fees, and what happens if your account becomes dormant. The agreement may disclose if the credit union has a security interest if your loan becomes delinquent or your share account becomes negative. The agreement also discloses if the credit union has a cross collateralization clause for your automobile, for example, it can hold the automobile for security for other loans you have with the credit union.

Account History: The history of an account over a specific period of time for either shares or loans.

Account Holder: All persons designated and authorized to transact business on behalf of an account. Each account holder's signature needs to be on file with the credit union. The signature authorizes that person to conduct business on behalf of the account without the other account holders consent.

Accrued Interest: Interest that has been earned, but not yet paid, to the account holder for a share account; or interest due, but not yet paid by a borrower on a loan.

Adjustable-Rate Mortgages (ARMS): A mortgage that does not have a fixed interest rate. The rate changes during the life of the loan based on movements in an index rate, such as the rate for Treasury securities or the Cost of Funds Index. ARMs usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets maximum and minimum rates. When interest rates increase, generally your loan payments increase; when interest rates decrease, your monthly payments may decrease. For more information on ARMs, see the Consumer Handbook on Adjustable Rate Mortgages.

Adverse Action: Under the Equal Credit Opportunity Act, a creditor's refusal to grant a loan on the terms requested, or termination of an existing line of credit loan.

Adverse Action Notice: The notice required by the Equal Credit Opportunity Act advising a loan applicant or existing debtor of the denial of their request for credit or advising of a change in terms considered unfavorable to the borrower. Freezing the line of credit on a home equity loan requires the financial institution to send the adverse action notice to the borrower describing why the financial institution froze the line.

Affidavit: A sworn statement in writing before a proper official, such as a notary public.

Alteration: Any change involving a deletion or rewriting in the date, amount, or payee of a check or other negotiable instrument.

Amortization: The process of reducing debt through regular installment payments of principal and interest that will result in the payoff of a loan at its maturity.

Annual Percentage Rate (APR): The cost of credit on a yearly basis, expressed as a percentage.

Annual Percentage Yield (APY): A percentage rate reflecting the total amount of interest paid on a share account based on the interest rate and the frequency of compounding for a year.

Annuity: A life insurance contract sold by insurance companies, brokers, and other institutions. It is usually sold as a retirement investment. An annuity is a long-term investment and can have steep surrender charges and penalties for withdrawal before the annuity's maturity date. (Annuities are not federally insured by the NCUSIF.)

Application: Under the Equal Credit Opportunity Act (ECOA), an oral or written request for a loan that is made in accordance with the procedures established by the financial institution for the type of loan requested.

Appraisal: An independent evaluation of your home or business to establish a value for a specific period of time.

Authorization: The issuance of approval, by a credit card issuer, merchant, or other affiliate, to complete a credit card transaction.

Automatic Bill Payment: An automated system generally found in home banking where an account holder has the ability to pay recurring bills. For example, the member will enter the payment information of the merchant into the bill payment system, and the system sends a payment either monthly or a one-time payment. The financial institution sends either a debit or a paper check depending upon the merchant’s capabilities.

ACH - Automated Clearing House: An electronic deposit or withdrawal from your share account such as direct deposit of members' salaries and government benefit payments (e.g., social security, welfare, and veterans' entitlements), and preauthorized transfers.

ATM - Automated Teller Machine: A machine, activated by a magnetically encoded card or other medium that can process a variety of banking transactions. These transactions include accepting deposits and loan payments, providing withdrawals, and transferring funds between accounts.

Availability Date: The date, according to a financial institution's policy, as to when funds deposited into an account will be available for withdrawal. The Expedited Funds Availability Act requires a financial institution to adhere to a specific schedule.

Availability Policy: A financial institution’s policy as to when funds deposited into an account will be available for withdrawal.

Available Balance: The balance of an account, less any merchant holds from pending debit card transactions, uncollected funds, or other restrictions against the account.

Available Credit: The difference between the credit limit assigned to a cardholder’s account or a line of credit indicating the remaining amount of funds to borrow on the account.

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