President's Choice Financial|helpful stuff|glossary

glossary image Glossary

Bank-speak and financial jargon can often be confusing. That's why we've compiled a handy list of definitions for the banking terms we use, written in plain and simple language.

Select a letter below to see an alphabetical listing of terms and their definitions.

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P

Q | R | S | T | U | V |W | X | Y | Z

ABM (automated banking machine)

A bank machine, sometimes referred to as an automated teller machine (ATM). Using your President's Choice Financial^® bank card or President's Choice Financial^® MasterCard^®, you have immediate access to any President's Choice Financial or CIBC bank machine free of charge.

For a fee, you may use any other bank machine which displays the Interac® symbol. President's Choice Financial bank machines are located in participating supermarkets, while CIBC bank machines displaying the Interac logo can be found virtually anywhere in Canada.

Find a President's Choice Financial or CIBC bank machine.

annual return

The fund return, for any 12-month period, including changes in unit value and the reinvestment of distributions, but not taking into account sales, redemption, distribution or other optional charges or income taxes payable by any unitholder that would reduce returns.

amortization

The repayment of a loan by installments.

asset

Anything owned by, or owed to, an individual or business which has commercial or exchange value (e.g., cash, property, etc.).

asset mix

The weighting of assets in an investment portfolio among different asset classes (e.g. shares, bonds, property, cash, overseas investments.

bank draft

A guaranteed form of payment which is issued in amounts over $5,000.

bond

A debt security issued by a government or company. You receive regular interest payments at specified rates while you hold the bond and you receive the face value when it matures. Short-term bonds mature in less than five years; medium-term bonds mature in six to ten years; and long-term bonds mature in eleven years or greater.

Canada Savings Bonds

A bond issued each year by the federal government. These bonds can be cashed in at any time for their full face value.

capital gain

The positive difference between the adjusted cost base of an investment held as a capital property and the proceeds of disposition you receive when you sell it. When you sell such an investment for more than you paid, you realize a capital gain.

capital loss

The negative difference between the adjusted cost base of an investment held as a capital property and the proceeds of disposition you receive when you sell it. When you sell such an investment for less than you paid, you incur a capital loss.

co-borrower

A co-borrower is the secondary borrower on a borrowing account. The primary borrower will receive mailed monthly statements while the co-borrower has the option to choose whether or not he/she will also receive statements.

collateral

A pledge of property or other assets by a customer who is borrowing from a financial institution. Financial institutions require collateral as security in the event that the customer defaults on his/her loan.

compounding

When an asset generates earnings that are then reinvested and generate their own earnings.

credit

On your bank statement, 'credit' represents funds that you have deposited into your account. The opposite of a credit is a debit.

However, ‘credit’ also means money that you borrow from a financial lender, like a bank. A credit card, for example, is a card that allows you to access funds which you then have to repay.

credit bureau

An organization that provides President's Choice Financial services, as well as other financial institutions, with credit information concerning existing or potential customers who are looking to obtain credit services.

credit card

A revolving source of credit with a pre-established limit. You have to pay interest on a credit card if you have an outstanding balance.

credit memo

A record of the funds which have been credited to your account.

debit

Funds which have been deducted from your account. The opposite of a debit is a credit.

debit card

A card which enables you to directly access your bank account when paying for purchases. So instead of paying in cash or with a credit card, a debit card allows the specified amount of the purchase to be electronically debited, or withdrawn, from your bank account. See Interac Direct Payment for an explanation of the actual procedures that you follow at the point of sale (POS) terminal to use your debit card.

debit memo

A record of the funds which have been debited from your account.

direct deposit

A system where funds are electronically credited to your account by a financial institution or a payroll service. For example, you can arrange with your employer to have your pay cheques automatically deposited into your President's Choice Financial no fee bank account.

diversification

An investment technique intended to minimize risk by utilizing a wide variety of investments within a portfolio. In a diversified portfolio, a decline in the value of one investment, for example, should be offset by the strength of other investments.

draft

A guaranteed form of payment which is issued in amounts over $5,000 (also see bank draft).

earned income

Earned income is generally an individual's salary or wages from employment. It also includes some taxable benefits. Earned income also includes business income if the individual is self-employed. Earned income is used as the basis for calculating RRSP maximum contribution limits.

EFT (electronic funds transfer)

Funds which are electronically credited to your account (e.g. direct deposit), or electronically debited from your account on an ongoing basis (e.g. a pre-authorized monthly bill payment, or a monthly loan or mortgage payment). A wire transfer is a form of EFT.

equity

The net worth of a company. This represents the ownership interest of the shareholders (common and preferred) of a company. For this reason, shares or stocks are often known as equities.

growth funds

Mutual funds that seek long-term capital growth. This type of fund invests primarily in equity securities.

guaranteed investment certificate (GIC)

A GIC is an investment that gives you a guaranteed rate of return over a fixed period of time, usually between 30 days and 5 years. GICs are available from banks, trust companies, and other financial institutions.

income funds

Mutual funds that seek regular income. This type of fund invests primarily in government, corporate and other types of bonds, debt securities, and other income producing securities and in certain circumstances can also hold common and preferred shares.

index

An index is a statistical measure of a market based on the performance of a sample of securities in that market. For example, the S&P/TSX Composite Index reflects the performance of the most actively traded stocks on The Toronto Stock Exchange.

index funds

Mutual funds that aim to track the performance of a specific stock or bond index. This process is also referred to as indexing and passive management.

Index Portfolio Rebalancing Service (IPRS)

CIBC's Index Portfolio Rebalancing Service (IPRS) is a comprehensive investment service that can help increase potential returns while reducing volatility. Several portfolios are available, each with its own strategic balance of CIBC Index Funds. IPRS maintains your personal asset allocation by monitoring and rebalancing your portfolio semi-annually.

Interac^® Direct Payment

Instead of paying with cash or a credit card, Interac Direct Payment allows you to pay for your purchase with a debit card, such as your bank card. The amount of the purchase is electronically debited, or withdrawn, from your bank account (see debit card).

Here's how to pay for items using Interac Direct Payment and your President's Choice Financial account:

1. Swipe your bank card (or debit card) through the point of sale (POS) terminal at the store's check-out
2. Enter your personal identification number (PIN), confirm the amount to be paid and indicate the account (chequing) from which the money is to be drawn.
3. The specified amount is then electronically debited from your account.

With President's Choice Financial services, you won't be charged any fees for Interac Direct Payment transactions.

Interac system

Canada's bank machine and electronic debit system. If you use your President's Choice Financial bank card at a bank machine which displays the Interac symbol (and that bank machine is not a President's Choice Financial or CIBC bank machine), you will be charged a fee.

interest

The cost of a loan or the compensation paid for the use of money. For example, with President's Choice Financial services, you are paid interest for deposits you make into a savings account, and you pay interest for money that you borrow from a low-cost borrowing account.

international fund

A mutual fund that can invest in securities issued anywhere outside of Canada.

line of credit

A revolving source of credit with a pre-established limit. You access the funds only as you need them, and any amount that you pay back becomes accessible to you again. Unlike a personal loan, a line of credit permits you to write cheques and make bank machine withdrawals, and requires you to pay interest only on the funds that you actually use.

loads

Loads are sales fees (or commissions) that are charged when you buy a mutual fund. Index funds offered by CIBC Securities Inc. do not carry loads.

management expense ratio (MER)

The total expenses expressed as an annualized percentage of daily average net assets. MER does not include brokerage fees and commissions, which are also payable by the Fund.

management fee

The fee paid to the fund’s manager for supervising the administration of the fund.

money market fund

A type of mutual fund that invests primarily in short-term debt securities maturing in one year or less. These include treasury bills, bankers’ acceptances, commercial paper, discount notes and guaranteed investment certficates.

money order

A guaranteed form of payment in amounts up to and including $5,000. You might request a money order in order to pay for tuition fees at a university or a college, or for a magazine subscription.

President's Choice Financial services offers money orders instead of certified cheques.

mutual fund

When you buy a mutual fund, you are pooling your money with that of other investors. An investment professional called a portfolio advisor takes that money and invests it for all the investors in a variety of different securities as determined by the investment objectives of the mutual fund. This gives you the benefit of diversification that is, being invested in many different investments at once.

net asset value

The value of all the holdings of a mutual fund, less the fund's liabilities.

NSF (non-sufficient funds)

This appears on your statement if there are insufficient funds in your account to cover a cheque that you have written or a pre-authorized payment that you have already arranged. You will be charged a service fee for non-sufficient funds.

online bill payment

The electronic payment of a bill via the Internet. The specified amount of the bill is electronically debited from your account.

overdraft protection

A short-term source of credit which allows you to overdraw on your account up to a pre-established limit. For example, overdraft protection spares customers both the cost and the personal embarrassment of NSF cheques. Overdraft protection is attached to your PCF Chequing Account.

personal loan

A lump sum that you borrow from a financial institution for a specified period of time. To repay the loan, you pay interest on the entire lump sum, and make payments on a scheduled basis.

PIN (personal identification number)

A secret code that you use to access your bank account at a bank machine or at a point of sale (POS) terminal. You may also have a PIN for banking by telephone.

personal line of credit (PLC)

A revolving source of credit with a pre-established limit. You access the funds only as you need them, and any amount that you pay back becomes accessible to you again. Unlike a personal loan, a PLC permits you to write cheques and make bank machine withdrawals, and requires you to pay interest only on the funds that you actually use.

The President's Choice Financial low-cost borrowing account and secured borrowing account both act as personal lines of credit.

PLUS system

A bank machine network outside Canada, across the U.S. and internationally. Customers who use a bank machine with a 'PLUS' symbol may be charged a fee.

point of sale (POS)

The terminal at which a customer uses his/her debit card to make a direct payment transaction. See also Interac Direct Payment.

pre-authorized direct deposit

A system where funds are electronically credited to your account by a financial institution or a payroll service.

pre-authorized payment

A system where funds are electronically debited from your account on a specified date by a financial institution (e.g., bill, mortgage or personal loan payments) or perhaps an insurance or an utility company.

prime rate

The rate of interest that Canadian financial institutions charge on Canadian dollar loans to certain customers. It is based on the rate established by the Bank of Canada. Typically, all financial institutions have the same prime rate.

prospectus

A legal document that must be filed with securities regulators in order to distribute securities, including mutual funds. Mutual fund dealers are required by law to distribute this document to investors before the purchase of any units. It contains all key information, such as investment objectives and strategies, risk factors and financial highlights.

qualified investments

Qualified investments is the term used for investments that can be held in an RSP. These investments generally include:

Canadian dollar savings accounts, guaranteed investment certificates, term deposits
shares of Canadian and foreign companies listed on a prescribed stock exchange
shares of some over-the-counter U.S. and Canadian companies
shares of some small businesses
certain types of bonds and money-market investments such as treasury bills, Canada Savings Bonds, Government of Canada bonds, provincial government bonds, Crown Corporation bonds, bonds issued by Canadian corporations listed on a prescribed stock exchange, and certain strip bonds
certain types of mortgages, including your own
certain covered call options, warrants and rights
certain mutual funds

redeemable

The customer has the option to redeem (cash-in) part or all of an investment before it matures. Depending on the investment, early redemption may entail an interest rate penalty.

RRSP (Registered Retirement Savings Plan)

A savings plan registered with Revenue Canada, which allows you to set aside a portion of your earned income now for use in the future. When you contribute to your RRSP, you are eligible to claim a tax deduction. However, cashing RRSPs at a later date will result in the payment of tax.

Regular Investment Plan (RIP)

A plan offered by CIBC Securities Inc. under which you may make regular deposits of the same amount to your CIBC Mutual Funds account once a month, once every 2 weeks, or once a week. You can also make regular deposits up to four times a month on any dates you choose. CIBC Securities Inc. will withdraw the money directly from your bank account at any financial institution in Canada including your President's Choice Financial^® bank account.

risk

Risk measures the possibility that your investment may lose or gain value as compared to the expected rate of return. Risk is different from uncertainty, which is not measurable.

savings funds

Mutual funds that seek to preserve capital. This type of fund invests primarily in short-term securities with an average term to maturity of one year or less, or in the case of money market funds, 90 days or less.

secured loan or line of credit

A lump sum of funds (loan), or a revolving source of credit with a pre-established limit (line of credit), for which the customer must provide collateral.

spousal RRSP

The RRSP rules allow you to contribute to an RRSP for your spouse and claim the deduction yourself. Your total contribution (to your own and your spouse's plan) is still subject to your normal contribution limits, minus any personal pension adjustment and any past service pension adjustment, plus any unused contribution room from prior years and any pension adjustment reversal. Generally, the advantage is that your spouse will ultimately be the one who reports the income for tax purposes when the funds are withdrawn on retirement or otherwise (certain restrictions apply). If your spouse will have a lower income than you when the funds are withdrawn, significantly lower taxes may be payable on the withdrawn amount.

stop payment

A service which enables you to request a 'stop' on any cheque or other pre-authorized payment, as long as the funds have not yet been disbursed. For example, you might request a stop payment on a post-dated cheque if you no longer need the product or service for which that cheque was initially written.

systematic withdrawal plan

Plans offered by mutual fund companies that allow unitholders to receive payment from their investment at regular intervals.

term

The period of time during which a financial contract – such as a GIC or a loan – is in force.

tiered interest rate

A pre-set scale of interest which is based on the premise that higher sums of money earn higher rates of interest.

volatility

A measure of the amount of change in the daily price of a security over a specified period of time. It is Uusually given as the standard deviation of the daily price changes of that security on an annual basis.

wire transfer

An electronic transmission of money from one place to another. For example, you might request that your bank transfer money from your bank account in Vancouver to the account of a relative in Quebec City. To do this, you would provide the relative’s name and account number, as well as the address of the bank in Quebec City. Your bank would then "wire" the funds, which would usually arrive within a couple of days.

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