Banking is incredibly important for startups and entrepreneurs. We've compiled the most important banking terms every startup should know about in 2022.
Banking plays a pivotal and continuous role in any entrepreneur’s or small business owner’s journey. Whether it's a simple act of opening a business bank account, or applying for a loan or making payroll -- banking is an integral part of any business. However, there are way too many terms to know and comprehend. Thus, we've created this detailed glossary page for key banking terms and definitions that every startup entrepreneur must know.
It is a unique string of numerical digits used to identify an account in a bank or financial institution. Every account you own has one attributed to it. Your account number is a unique identifier needed to send and receive funds to your bank account.
It is a document prepared by a bank that shows an account's transaction history over a particular period. It records the movement of money in and out of all accounts held by an individual or a business.
It refers to the rate of return on an investment over a year, considering the effects of compound interest. It is a means to calculate the amount of money accrued by an interest-bearing account annually.
It is an electronic system that processes transactions between financial institutions. It is a crucial component of national and international banking that allows the electronic transfer of funds and online payments into depository institutions.
Your available balance is the total amount of money accessible in your account, excluding unprocessed debits and credits. It includes funds or deposits free for withdrawals, transfers, and other immediate uses.
It refers to the tangible property or asset used as a legal exchange while taking a loan from a lender such as a bank. It is a security that protects the lender if the borrower defaults and is unable to make payment. Therefore, when you apply for loans, it is vital to have an asset that can be used as collateral, as this will improve your chances of getting it.
A checking account is a type of bank deposit account that allows easy access to your money for daily transactions. It's also called a transactional account and permits multiple withdrawals and unlimited deposits. However, most traditional checking accounts don't allow you to earn interest.
It is the interest on a loan, bank deposit, or investment, and it is based on the initial principal and includes the previous interest earned on it. Contrary to simple interest, in this case, the interest earned is reinvested or lent out, increasing the principal and earning you more interest.
It is a credit or debit card issued to a company or business corporation. It is used by the business owners, directors, and employees to pay for authorized business expenses directly from the company's account. The company is legally responsible for all payments charged to the corporate card.
A debit card is a card that allows the holder to electronically access the money in their account for transfers and other transactions. Payments are directly deducted from the checking account of the cardholder. Unlike a credit card, this is not a borrowing account.
It refers to a currency that exists only in a digital or electronic form. It is a medium of payment that is generated, stored, managed, and exchanged over a digital system. Bitcoin or other cryptocurrencies are recorded in a public ledger. Unlike traditional currencies such as the USD, they are not backed by a country’s governing banking authority.
A direct deposit is the electronic transfer or deposit of funds into an account by a payer. Unlike cheques, direct deposits require no physical appearance at the bank. Instead, it is done through an electronic network called the automated clearing house (ACH).
The electronic transfer of check information and images between banks speeds up the check-cashing process. It involves taking pictures of the front and back of a check and sending these images to the payer's bank for processing. In contrast, traditional check deposits would require the bank account holder to take the check physically to a retail bank to verify and process it.
It refers to the electronic transfer of money from one bank account to another through a computer-based system. It is an automatic movement of funds within a financial institution or across multiple ones without staff interference.
The Federal Deposit Insurance Corporation (FDIC) provides insurance for deposits made in American depository institutions. This insurance covers up to $250,000 of deposits in qualified bank accounts.
A card is said to be frozen when transactions, including withdrawals and online payments, are blocked. This often occurs when you report your missing card or fraudulent behavior is detected on your account. In some cases, you might be able to perform other tasks such as deposits; however, it depends on the bank or financial institution.
Insufficient funds occur in a situation where the available balance of an account is not enough to cover a payment or fees. It defines the deficit state of a bank account in relation to transactions such as electronic transfers and withdrawals.
Interest is a fee paid or received for borrowing or lending money. It applies to savings accounts, certificates of deposits, and money market accounts.
An interest rate is a percentage of the money borrowed or lent to be paid or received as interest over a particular period. Debts such as loans and credits attract interest. Also, savings and investment accounts such as certificates of deposit, mutual funds, stock purchases, etc., also include interest rates.
It is a commercial document issued by a seller to a buyer, requesting payment for goods and services provided. It highlights the goods and services purchased, the quantity, the amount to be paid, and the deadline for payment.
It is an abbreviation for Know Your Customer. It is a term that refers to the background check done by banks to determine your company's eligibility for funding (capital loan).
It is basically your company's reserve. Liquidity means the particular asset or extra savings that are easily accessible to your company in case of unforeseen financial setbacks.
A margin call requests additional funds, capital, or securities when a margin account runs low on capital due to trade losses. It occurs when the value of securities in your investment account falls below the minimum requirement level called maintenance margin.
Online banking is the execution of financial transactions done over the internet. It is also known as internet banking, home banking, web banking, or mobile banking. It allows you to quickly access your bank account and perform transactions on your phones and computer from the comfort of your home.
It is the payment of one-time or recurring bills over the internet through a secure electronic service. It removes the hassle of carrying cash around or writing checks and mailing them.
An overdraft allows you to borrow money from the bank by withdrawing more money than you have in your current account. It is a type of loan charged by the bank. It typically involves transaction fees and interest for the amount that is borrowed.
A PIN is an account security measure made up of a combination of numbers to protect and secure an account from unauthorized access. It is usually associated with credit or debit cards and may be needed to complete transactions.
It is a bank identification number. While an account number identifies an account in a bank, a routing number identifies a financial institution. It is a nine-digit number usually found at the bottom of a check and specifies what bank your account is in.
It refers to the daily or monthly restriction placed on debit and credit cards, preventing card holders from spending above a particular amount of money. The cards are usually declined when they have reached the spending limit.
A stablecoin is a cryptocurrency whose value is connected to an external asset or reference such as gold or the U.S. dollar. It is considered a more useful medium of exchange and provides a stable means of trading more volatile cryptocurrencies.
Treasury involves the management of cash flows, liquidity, and financial risks. This is a department that oversees a company's investments and financial assets. It also ensures the assets of a business match its liabilities.
Treasury Bonds are debt securities (often fixed) issued and backed by the U.S. Federal Government. They are often considered the least risky investments since they are backed by a government’s ability to tax its citizens. The interest payments on these bonds are made semi-annually. Interest income is exempt from state and local incomes tax.
It is a digital payment card created online with the same features as a credit or debit card. It is a convenient means of payment protected by encryption. The virtual card is stored on your phone wallet and can be used to pay online and in stores.
Wire transfer is another type of electronic funds transfer (EFT). It is the electronic movement of money between local or international banks. It involves transferring money through a wire or network such as the Federal Reserve Wire Network (FedWire).
It is the return on an investment over a period, represented in percentage and based on its cost. For example, it refers to the profits made from interest or dividend payments on bonds, stocks, and other securities investments.
Founder Exclusive Deal:
Up to 3,500 bonus and 3% cash-back on all card spend [3], 6 months off payroll, and 50% off bookkeeping for 6 months, free R&D credit
Get StartedFounder Exclusive Deal: Up to 3,500 bonus and 3% cash-back on all card spend [3], 6 months off payroll, and 50% off bookkeeping for 6 months, free R&D credit
*Every is not a bank. Banking services provided by Thread Bank, Member FDIC. The Every Visa Business Debit Card is issued by Thread Bank, pursuant to a license from Visa U.S.A. Inc. and may be used anywhere Visa cards are accepted.
For Every customers with deposit accounts on Thread Bank, your deposits qualify for up to a maximum of $2,500,000 in FDIC insurance coverage when placed at program banks in the Thread Bank deposit sweep program. Your deposits at each program bank become eligible for FDIC insurance up to $250,000, inclusive of any other deposits you may already hold at the bank in the same ownership capacity. You can access the terms and conditions of the sweep program at go.thread.bank/sweepdisclosure and a list of program banks at go.thread.bank/programbanks. Please contact customerservice@thread.bank with questions on the sweep program.”
**Terms and conditions apply to the Cashback rewards program. Cashback earned will be credited to your account daily. ATM transactions, the purchase of money orders or cash equivalents, and account funding made with your debit card are not eligible for Cashback. Please refer to the Rewards Terms and Conditions for more details. No minimum opening deposit or minimum balance required.
***Your deposits qualify for up to $3,000,000 in FDIC insurance coverage when placed at program banks in the Thread Bank deposit sweep program. Your deposits at each program bank become eligible for FDIC insurance up to $250,000, inclusive of any other deposits you may already hold at the bank in the same ownership capacity. You can access the terms and conditions of the sweep program at https://go.thread.bank/sweepdisclosure and a list of program banks at https://go.thread.bank/programbanks. Please contact customerservice@thread.bank with questions regarding the sweep program.
[1]Yield is an annualized 4-week T-bill rate when held to maturity as of [08/21/24] [date must be within the last 7 days] . The rate shown is subject to price fluctuation and is net of fees. T-bills are purchased at a discount to par (par= $1,000), with the price being subject to market fluctuation. The amount of T-Bills available at a particular yield will depend upon the sellers’ offer size; any remaining cash balance after the purchase may not earn the same yield. In general the bond market is volatile, and fixed income securities carry interest rate risk. Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income securities also carry other risks, including inflation risk, liquidity risk, call risk, and credit and default risks for both issuers and counterparties.
[2]Yield as of [08/21/24]. The SEC yield for a money market fund is calculated by annualizing its daily income distributions for the previous 7 days. You should consider the investment objectives, risks, charges, and expenses of a money market fund carefully before investing. This and other information is found in the fund’s prospectus. Please read the prospectus before investing. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market fund. Yields fluctuate and past performance is no guarantee of future results.
[3] Atomic Invest LLC (“Atomic”), through a clearing relationship with Pershing LLC (“Pershing”) offers a cash sweep program. Funds in transit to or from Program Banks are generally not FDIC-insured. The Sweep Program is administered by Pershing, LLC. Deposits at each Program Bank are insured by the FDIC up to $250,000 for each insurable capacity. Based on eligibility criteria, the two FDIC-insured programs (“Bank Deposit Programs”) offered are 1) Dreyfus Insured Deposits (DIDI) and 2) Liquid Insured Deposits. Funds deposited into each sweep program, in aggregate, are eligible for up to $2,500,000 of FDIC insurance. The sweep programs can be configured so that once the funds reach one or more Program Banks (up to $250,000 for each insurable capacity at up to ten Program Banks), then the next Bank Deposit Program is initiated. Although certain types of accounts, such as trust accounts may be eligible for additional FDIC insurance based on the number of beneficiaries, funds will be allocated to each Program Bank in such a way that provides up to $250,000 of FDIC insurance for individual accounts and $250,000 of FDIC insurance for trust and other corporate account types, in each case per Program Bank. If clients elect to exclude one or more Program Banks from receiving deposits the amount of FDIC insurance available through the Atomic Invest account may be lower. Clients are responsible for monitoring their total assets at each Program Bank, including existing deposits held at Program Banks outside of the Atomic Invest account, to ensure FDIC insurance limits are not exceeded, which could result in some funds being uninsured. For more information on FDIC insurance please visit www.FDIC.gov. Deposits held in Program Banks are not protected by SIPC. For more information see Pershing’s Terms and Conditions and the Atomic Invest Form ADV Part 2A.
Every, Inc. has an engagement with Atomic Invest, LLC (“Atomic Invest”), an SEC-registered investment adviser, to bring you the opportunity to open an investment advisory account. Investment advisory services are provided by Atomic Invest. Companies which are engaged by Atomic Invest receive compensation of 0% to 0.85% annualized, payable monthly, based upon assets under management for each referred client who establishes an account with Atomic Invest (i.e., exact payment will differ). Atomic Invest also shares a percentage of compensation received from margin interest and free cash interest earned by customers with Every, Inc.. Every, Inc. is not a client of Atomic Invest, but our engagement with Atomic invest gives us an incentive to refer you to Atomic Invest instead of another investment adviser. This conflict of interest affects our ability to provide you with unbiased, objective information about the services of Atomic Invest. This could mean that the services of another investment adviser with whom we are not engaged could be more appropriate for you than Atomic invest. Neither Atomic Invest nor Atomic Brokerage, LLC (FINRA registered broker-dealer and member of SIPC), nor any of their affiliates is a bank. Investments in securities are Not FDIC insured, Not Bank Guaranteed, and May Lose Value. Investing involves risk, including the possible loss of principal.
Before investing, consider your investment objectives and the fees and expenses charged by Atomic Invest and/or Atomic Brokerage. Advisory services through Atomic Invest are designed to assist clients in achieving a favorable outcome in their investment portfolio. They are not intended to provide tax advice or financial planning with respect to every aspect of a client’s financial situation and do not include investments that clients may hold outside of Atomic Invest. For more details about Atomic Invest and/or Atomic Brokerage, please see the Form CRS, Form ADV Part 2A, the Privacy Policy, and other disclosures. Custodial and clearing services are provided to Atomic Invest and Atomic Brokerage by Pershing LLC.
