At Broken Hill Bank, we use banking terms and phrases unique to the finance industry. Here is our glossary of banking terms to help you understand exactly what the terminology means to better understand finance documents and topics.
A-F
Account: An account is a banking product that allows you to deposit and access your money. When you hold a bank account or savings account, you can withdraw, deposit and in some cases, earn interest on your account balance.
Account number: A unique identifier assigned by a financial institution to a specific account belonging to a customer. It serves as a reference for transactions and account management.
Asset: Anything of value owned by an individual, company, or organisation.
Balance: The amount of money in a bank account at a given time that is available to spend or withdraw.
BSB: BSB stands for Bank State Branch number, a unique six-digit code identifying your bank and the specific branch where your account is located. Your BSB number is used to identify where an incoming bank transfer should be deposited. This essential number is required when arranging automatic direct credit/debit payments from your account balance to a provider.
For example, you may enter your BSB, identifying the bank and branch, and account number, identifying your nominated bank account, when providing permission for a regular insurance premium amount to be debited from your account.
Building loan: Building loans, also known as construction loans, are financial products designed to fund the construction of a property. A building loan may include funds for the purchase of land when constructing a brand-new home. Funds are released progressively at agreed stages of construction so the loan balance at each moment accurately reflects the increasing value of the property through each stage of building.
Comparison rate: A comparison rate is a single figure that includes both the interest rate and some fees and charges relating to a home loan or personal loan, providing consumers with a more accurate picture of the total cost of borrowing.
Compound Interest: Interest paid on the initial principal account balance and the accumulated interest on money borrowed or invested.
Credit score: numerical representation of an individual or corporation's creditworthiness based on their borrowing and repayment history.
Debit card: A plastic card that allows the holder to make electronic payments and purchases deducting funds directly from their bank accounts via ATM, EFTPOS and secure online transaction portals.
Deposit: A deposit is a sum of money paid into a bank account, for example, your wages or salary may be deposited into your account each week or fortnight.
In relation to a loan against an asset such as a vehicle or property, a deposit bond is the initial amount of money paid by the borrower toward the purchase price of the asset. It's the upfront contribution made by the borrower to make up the total purchase price, alongside the borrowed sum.
Electronic funds transfer (EFT): The electronic exchange or transfer of money from one account to another. The transaction may occur within a single financial institution or between different banks or lenders.
Equity: The value of an asset, such as your house or property, less any money owing on it.
Fixed Rate: An interest rate that remains unchanged for a portion of a loan term, or the entire term of an investment. It is the opposite of a variable interest rate.
G-L
Guarantor: A person or entity that agrees to be responsible for another individual's debt or obligations if they default on their payments.
Gross Income: Total income earned from all sources, before deductions for taxes and other expenses.
Home equity loan: A loan secured by the borrower's equity in their home, typically used for large expenses or home improvements. When you take out a home equity loan the total amount you owe on your home loan will increase, which can result in higher monthly payments.
Interest rate: The percentage of the balance charged by a lender for borrowing money or the percentage credited to an investment balance.
Inflation: The rate at which the general level of prices for goods and services that households typically buy rises over time.
Joint account: An account owned by two or more individuals who share equal access to funds and responsibility for account management.
Loan: A sum of money borrowed from a lender with the agreement to repay it, usually with interest, over a specified period.
Liabilities: Liabilities are financial obligations or debts owed by an individual or organisation to a bank or lender.
M-R
Margin: Refers to the difference between the interest rate charged by a bank on loans and the interest rate it pays on deposits. This difference is essentially the bank's profit on the services it provides. For example, if a bank lends money at an interest rate of 6% and offers savings accounts with an interest rate of 2%, the margin is 4%. This margin covers the bank's operating costs and contributes to its profits.
Mortgage: A Mortgage is the legal agreement that secures the loan, where the property purchased serves as collateral. This means if the borrower defaults on the loan, the lender has the right to take possession of the property through foreclosure.
NSF (Non-Sufficient Funds): A situation where a bank account does not have enough money to cover a transaction requested by the account holder.
Online Banking: Online banking, also known as internet banking, allows customers to conduct various banking activities and transactions over the internet, without the need to physically attend a bank branch.
Outstanding balance: The outstanding balance refers to the amount owed on a loan or credit account at a specific point in time.
Overdraft: An overdraft is a financial arrangement with a bank that allows an account holder to withdraw more money than they have in their account, up to a certain limit. This creates a negative balance but allows the account holder to continue making transactions. Overdrafts often come with fees and interest charges. For example, if your overdraft limit is $2,000 and your account balance is $500, you can still make transactions up to $2,500 in total.
Overdrawn account: An overdrawn account occurs when a person withdraws more money from their bank account than is available in the account balance, resulting in a negative balance. For example, if your account balance is $50 and you make a purchase for $100, your account will be overdrawn by $50.
Principal: The original amount of money invested or loaned, not including interest or earnings.
Quarterly report: A quarterly report is a financial document issued by a company every three months, summarising its financial performance and results for the quarter.
Return on Investment (ROI): A financial metric used to evaluate the profitability of an investment, expressed as a percentage of the cost of investment.
S-Z
Savings account: An interest-bearing deposit account held at a bank or financial institution primarily for storing funds and earning interest.
Secured loan: A secured loan is a loan that is secured against an asset, such as a home or car.
Transfer: The movement of funds from one account to another, either within the same financial institution or between different institutions.
Term deposit: A fixed-term investment account that pays a fixed rate of interest until maturity, offering guaranteed returns.
Variable interest rate: An interest rate that can fluctuate over time based on changes in market conditions and the Reserve Bank of Australia’s (RBA) official cash rate.
Unsecured loan: An unsecured loan is a type of loan that is not backed by collateral, such as a home or a car.
Withdrawal: The act of taking money out of a bank account or financial institution.
Banking with Broken Hill Bank
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