Glossary of Banking Terms

Please click the first letter of the term you are interested in learning about:

A

Automated Banking Machines (ABMs) Self-service machines that allow you to perform everyday basic banking transactions e.g., deposits, withdrawals, bill payments and transfers between accounts using a bank card. Scotiabank has over 3,000 ABMs (also known as Automated Teller Machines) across Canada.

B

Bank Card A card (also known as a debit card) issued by a financial institution that allows access to accounts.

Bank Draft This is a cheque issued by a bank after debiting the paying customer's account. In some countries it is also known as Banker's Draft or Cashier's Cheque. Although generally considered a secure form of payment, drafts can be stolen or counterfeited. Therefore, exercise caution when accepting a bank draft, especially from someone you do not know.

C

Cheque A formal written instruction to a bank to transfer the stated amount of money from the payer's account to the payee named on the cheque.

Chequing Account This is a type of account where you can access your money on demand. You must make sure you always have enough money in your chequing account to cover the cheques that you have written. In some countries this type of account is also known as a Current Account.

Cheque Hold A “hold” on the deposit of the cheque is placed to ensure that the financial institution on which the cheque is drawn will not return the cheque. A hold, however, provides no guarantee that a cheque won't be returned as invalid or otherwise after the hold period has expired.

Credit Card Such as a VISA* card allows the holder to charge purchases rather than pay cash. Generally, no interest is charged on new purchases as long as the monthly balance is paid in full in both the previous and current month by the due date (here is generally no interest-free rate period for cash advances, balance transfers, and VISA* cheques).

Credit History Your credit history is a record of any debt or loan that you hold, held in the past, or for which you have applied. It also includes the credit limits of those debts, loans or debts guaranteed and your payment history. It is used by lenders as part of the decision making process when evaluating whether to extend new or additional credit to a borrower. Your credit history is compiled by Canada's major credit bureaus. (Equifax, TransUnion)

Credit Limit The maximum balance you may charge on a credit card or borrow from a line of credit.

Credit Rating An assessment of an individual's credit worthiness to estimate his/her ability and willingness to pay credit obligations. Banks and financial organizations refer to credit ratings when considering applications for loans and credit cards.

Customer Service Representative A front line bank employee to assist with your banking queries and provide banking services e.g., accept/pay cash, exchange currencies, issue drafts and wire transfers, etc. Traditionally, in some countries, they are also known as Bank Teller.

D

Debit Card Another name for a Bank Card that allows you to access your accounts. You can use it at banking machines or to pay for purchases at retailers using the Interac*** Payment service.

G

GICs (Guaranteed Investment Certificates, also Term or Fixed Deposits) GICs are an investment in which you deposit money, for a fixed period of time, and are paid a set rate of interest. GICs offer the flexibility of withdrawing all or part of your funds prior to maturity without penalty (certain conditions may apply).

I

Interac*** Network A network that links the ABMs of banks and other financial institutions in Canada, giving you automated access to bank accounts using other participating banks' ABMs. It is a method of paying for goods and services electronically with the funds taken immediately and directly from your bank account and transferred directly into the merchant's account.

Interest Interest is a charge paid on borrowed funds. For example, if money is borrowed from a bank in the form of a loan or line of credit the bank will charge interest for the use of that money. It does not include any other costs or fees incurred because of the loan.

Internet/Online Banking Online banking enables customers with internet access and authorization from their bank(s) to manage their banking transactions electronically. It can be used for checking bank account and credit card balances, transferring funds, paying bills and applying for new products and services.

M

Mobile Banking Lets you manage, move and monitor your money from your mobile phone, all in real-time. It includes services such as App Banking, Browser Banking and Text Banking.

Mortgage A loan secured by real estate. It is often granted to purchase a home. Some types of mortgages are:

  • Conventional Mortgage - A mortgage loan that does not exceed 80% of the lesser of the appraised value or the purchase price of the property.
  • Fixed Rate Mortgage - The rate of interest and payment amount is fixed for a specific term.
  • Variable Rate Mortgage - A variable rate mortgage is where the rate of interest changes when the lender's Prime lending rate changes.

Mortgagee and Mortgagor The lender is the mortgagee and the borrower is the mortgagor.

N

NSF (Non Sufficient Funds) A cheque considered to be NSF indicates that the funds in the bank account the cheque was drawn on were less than the amount of the cheque.

Non-Registered Accounts can be used for a variety of investing needs such as putting money aside for vacation, saving for a home or supplementing your retirement income. Unlike registered accounts, you can’t defer taxes on the income you earn. The rate of tax you pay depends on the type of earnings generated from the investments you hold and the kind of investments you make. Cash, GICs and mutual funds can be held within a non-registered account.

O

Overdraft Protection An agreement with the bank that temporarily allows you to overdraw your bank account up to a pre-approved limit. In addition to interest charges, banks usually charge a monthly fee for this service.

P

Passbook A book provided by the bank at the request of a customer, in which all transactions in a bank account are noted.

Personal Identification Number (PIN) A unique number or security access code created by the user. This is used to access the bank account in combination with the Bank Card when making an Automated Banking Machine or Interac Direct Payment or for internet and telephone banking transactions.

R

Registered Education Savings Plan (RESP) An RESP is designed to help you save for the post-secondary education of a child. Although RESP contributions are not tax-deductible, they do allow savings to compound and grow on a tax deferred basis until the funds are withdrawn for a qualified education program.

Registered Retirement Savings Plan (RRSP) Registered savings accounts allow you to save for retirement. Income and capital gains from your investments accumulate, on a tax-deferred basis, until withdrawn from the account. Income and capital gains earned in these accounts are taxed as regular income when withdrawn. There is no preferential tax treatment in Canada for dividends and capital gains.

S

Savings Account This type of bank account usually pays interest on the funds deposited and provides easy access to your money, although a cheque book is not provided.

T

Telephone Banking This service enables you to make banking transactions remotely, by phone. Scotiabank offers a free telephone banking facility - TeleScotia telephone banking - to its customers.

Term The period of time that an investment or a loan remains in effect.

Transaction An activity in a bank account. It may be a deposit, withdrawal, debit card or bill payment, service charge or interest payment.

W

Wire Transfer A wire transfer is a transfer of money from one bank account to another account at the same or another institution/country. In some countries this is also known as telegraphic transfer.