Glossary

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A

401(k) Plan


A plan sponsored by the employer that allows employees to contribute a portion of their gross salary to a savings or profit-sharing plan. Often the employer will partially match the employee’s contributions into the plan. Contributions and income earned are tax-deferred until withdrawn at age 59½.


403(b) Plan


A plan set up for public employees and employees of non-profit organizations; similar to a 401(k).


ACH - Automated Clearing House 


A computer-based interchange for clearing deposits and payments electronically.


Annual Percentage Rate


The rate of interest (in terms of a percent, such as 9.4%) being charged for a loan over a year’s time. The APR includes interest, transaction fees and service fees. Look for APRs on such things as credit cards, student loans and car loans.


Annual Percentage Yield


The amount of interest earned on a deposit account (checking, savings, share certificates, IRAs), including the effect of interest compounding, assuming funds remain in the account for one year.


Average Balance 


The average amount in a deposit account that equals the sum of the daily balances during an accounting period, usually a month, divided by the number of days in the period. Can sometimes be used to avoid service charges or to qualify for special services. See also, minimum daily balance.


Automatic Deposit


An arrangement that authorizes an employer to deposit paychecks automatically to the employee’s credit union account (usually checking or savings).


Automatic Payment


An arrangement that authorizes payments to be deducted automatically from a credit union account (usually checking or savings) to pay bills (such as insurance payments, rent, mortgage or loan payments). Payments are usually scheduled to be made on a certain day of the month.


Automatic Transfer


An arrangement that moves funds from one account to another automatically on a pre-arranged schedule; for example, every payday or once a month.