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ACH Processing (ACH - Automated Clearing House) - Processing that occurs between a national network of banks or financial institutions that send messages electronically, via telecommunications lines instead of paper (checks), to transfer funds between two parties. The most common form of ACH transactions are direct deposit, pre-authorized debits, cash concentration, and corporate to corporate payments.
Annual Percentage Rate (APR) - The relationship of the total finance charges associated with a loan. This must be disclosed to borrowers by lenders under the Truth-in-Lending Act. It is a function of the loan amount, the interest rate, the total added cost, and the terms. The APR would equal the interest rate if there is no additional cost to a given loan.
Annual Percentage Yield (APY) - Reflects the total amount of interest paid on a deposit account, based on the interest rate and the frequency of compounding for a 365-day period.
Automated Teller Machine (ATM) - A machine that allows a customer to perform common teller transactions. Transactions may include cash withdrawals and transfers. ATMs are generally accessible 24 hours a day, 7 days a week. (Merchants and Farmers Bank does not accept deposits at ATMs.)
Average Daily Balance - The average dollar amount that resides in an account over a specific period of time. The formula for calculating the Average Daily Balance is accomplished by adding the daily balances over a period of time and dividing by the total number of days in that period.
Bank Draft - A check drawn by one bank against funds deposited into its account at another bank, authorizing the second bank to make payment to the individual named in the draft.
Cashier's Check - A check drawn by a bank on itself, signed by the Cashier or other authorized bank officer and payable to a third party named by the customer. Cashier's Checks are universally accepted.
Certified Check - A bank guarantees payment on this type of check.
Certificate of Deposit (CD) - A type of deposit account with a minimum initial deposit and fixed term (months until maturity).The current rate will dictate how interest is earned for the term. Usually, interest payments may be added back to the CD or payable by check or deposited to another checking or savings account at the depositor’s institution. Most CD's automatically renew at the end of a term at the current rate at the time of renewal.
Checking Account - An account which allows the account owner to write checks against the account on deposited funds.
Check Safekeeping - The process of digitizing customer's paid checks. The digital image becomes the official record of the transaction and is kept by the financial institution. Canceled checks are stored electronically rather than being returned to the customer.
Compound Interest - Accrued interest when earnings for a specific period are added to principal. Interest for the following period is computed on the principal plus accumulated interest.
Daily Compounding - An interest calculation in which interest is added to the principal each day. Interest is then earned on the new balance.
Debit Card - A plastic card with either the Master Card or VISA logo, designed to give a customer access to funds in his/her checking account to obtain cash or purchase goods and services. The cards are accepted around the world wherever you see the Master Card or VISA logo. Merchants and Farmers Bank issues a Visa debit card.
Direct Deposit - Automatically deposited funds to checking or savings accounts via a pre-authorized system. Customer government benefits or other payments are automatically deposited to their checking or savings accounts. Some types of Direct Deposits are Social Security, SSI, VA benefits, annuities, pension benefits, payroll checks and dividend checks.
Electronic Funds Transfer - Any transfer of funds that are implemented by electronic means. Examples of electronic funds transfer means include: electronic terminal, telephone, computer, ATM or magnetic tape.
FDIC (Federal Deposit Insurance Corporation) - Insures depositors up to $250,000 in most United States banks and savings associations (also called savings and loan associations or S&Ls). Arranges a resolution for each failing institution - one that is the least-costly to the insurance fund and, when possible, the least disruptive for customers. Promotes the safety and soundness of insured depository institutions and the U.S. financial system by identifying, monitoring and addressing risks to the deposit insurance funds. The FDIC also is the primary federal regulator of about 6,000 state-chartered "nonmember" banks (commercial and savings banks that are not members of the Federal Reserve System).
Funds Availability- The dollar amount or time period represented by checks that have been deposited but have not cleared.
Grace Period - A period of time during which a depositor can withdraw funds from a certificate without being penalized.
Inactive Account - Transactions have not occurred on a bank account for an extended period of time.
Individual Retirement Accounts (IRA) - Merchants and Farmers Bank offers two types to choose from for eligible individuals, the Traditional IRA and the Roth IRA.
Money Market Deposit Account - A deposit account offered by banks and financial institutions directly equivalent to, and competitive with, money market mutual funds.
Multiple Party Account - Account owned by two or more parties. Parties own the account during the life time of all parties in proportion to their net contributions, unless there is clear and convincing evidence of a different intent.
Online Banking - Personal and business account information accessible through a personal computer and the Internet.
Online Bill Pay - Bill payment is available online and allows you to make payments to several different vendors. Paper checks are issued when ACH payments are not available through bill payment.
Overdraft - The amount by which withdrawals exceed deposits.
Overdraft Privilege - Service that allows the customer to overdraw their account up to a disclosed limit for a fee in order to pay a transaction
Overdraft Protection - A service that allows the customer to write checks for an amount over and above the amount in their checking account. Funds are transferred from their line of credit or other designated account to their checking account as needed. This service must be applied for and approved.
Personal Identification Number (PIN) - An account holder has a secret number or code to authorize a transaction or obtain information regarding his or her account. Often used in conjunction with a plastic card (ATM or Debit card), online account access or with a telephone voice response system.
Roth IRA - Contributions are not deductible but distributions can generally be withdrawn tax free.
Savings Account - A deposit account with no legal limits or requirements as to amount, duration, or times of additions. Savings accounts do not come with checks but do include ATM cards for cash withdrawals.
Signature Card - A contractual form, executed by an account holder, establishing account ownership and setting forth some of the basic terms of the account and provisions of the deposit contract.
Stop Payment - A request to a bank not to honor or allow the payment of a check after it has been delivered but before it has been presented.
Tax Identification Number (TIN) - The number used to identify an individual or business for federal income tax purposes. This would be an individual's Social Security number (SSN).
Tiered Interest Rate - An interest rate structure that allows for increased interest based on a higher tiered rate and increased account balance for that rate.
Traditional IRA - Contributions may be partially or fully deductible, but distributions are generally taxable.
Uncollected Funds - Funds that have been deposited in an account or cashed against an account by a check that has not yet been cleared through the check collection process and paid by the drawee bank. Temporary holds are sometimes placed on their customer's uncollected funds. Funds are unavailable for withdrawal until the time period the hold expires.
Wire Transfer - An electronic transfer of funds from one financial institution to another. Wire Transfers require the routing transit number, dollar amount, account number and name of the account owner(s).
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