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Concentration accounts are good for banks because they allow them to settle internal transactions the same day. However, they’ve received a lot of flack over the years because these large pools of money make it difficult to spot suspicious activities. Find out how concentration accounts work and what banks are doing to minimize the risk of money laundering. Definition and Examples of a Concentration Account Concentration accounts are internal bank accounts used by financial institutions to process and settle same-day transactions for customers....

You may consider a deferred interest mortgage if you want a lower payment at the start of a loan and a larger payment later on. Let’s learn more about the benefits and risks of these mortgage structures. Definition and Examples of Deferred Interest Mortgages Deferred interest mortgages are mortgages that offer lower interest payments at the beginning of a loan, with loan payments either increasing over time or due later in one lump sum....

Demo accounts are popular among traders in stocks, currencies, and commodities, but aren’t as useful for long-term focused investors. The longer it takes to earn profits in an investment, the less useful the demo account is because the demonstration takes time away from compounding real money. An example demo account is TD Ameritrade’s paperMoney. Using paperMoney, traders can modify the layout of the broker’s trading software (called thinkorswim) track and save historical returns, and use “do-overs” to retract completed trades....

Definition and Examples of Digital Wallet A digital wallet is an electronic service that stores and protects your bank and credit card information while allowing you to make contactless payments at a store, online, or within apps. When you’re using a digital wallet, you won’t have to swipe your credit card or enter your credit card information. Apple Pay is a type of digital wallet that can be used on Apple devices....

The most common example of a drawee is a bank. They act as a drawee each time you deposit a check or receive a bill of exchange. How Does a Drawee Work? The drawee is typically an intermediary or go-between during a financial transaction. In other words, they’re the ones directing funds from the payor’s account to the payee’s account. In most situations, the drawee is whichever bank the payor (i....

Alternate definition: A loan that bridges the gap between an investment purchase and long-term financingAlternate name: short-term bridge loan Hard money loans are used for quick turnarounds between the purchase and sale of a property. They can also be used for quick home financing until the buyer secures a traditional loan. These loans are generally used in the real estate industry. Some investors buy homes in need of repairs, fix them up, and then sell them for a profit....

The deductibles for an HDHP are often higher than the minimums set by the IRS, and they may be as high as the maximum OOP costs. Maximum OOP costs include deductibles, co-payments, and coinsurance. Deductibles exclude monthly fees and costs not covered by your HDHP, including out-of-network expenses. All plans bought through an Affordable Care Act (ACA) Marketplace and most through other means have to cover certain preventive services at an in-network provider no matter how much of your deductible you’ve paid....

Definition and Examples of Municipal Notes State or local governments issue debt instruments in the form of municipal notes that are typically repaid within one year. These debts are secured by expected revenue sources—commonly tax receipts, but they can also include bond proceeds, federal grant funds, or revenue generated from a public infrastructure or service. Municipal notes are often used to cover short-term needs, such as cash-flow relief or interim financing for capital projects....

If you’re a non-accredited investor, you won’t have the same investment opportunities as an accredited investor. However, there are upsides to your status, including increased protections from risky investments. Here’s what you need to know about the limitations and benefits of being a non-accredited investor. Definition and Examples of a Non-Accredited Investor Non-accredited investors fail to qualify as accredited investors under the U.S. Securities and Exchange Commission (SEC) accredited investor test standards....

If you had a recourse loan and defaulted on your debt, the lender can pursue the full value of the debt, even if they’ve already collected any collateral you’ve had on the loan. This can include garnishing your wages or pursuing other avenues in order to collect the debt. A non-recourse loan prohibits this practice. With a non-recourse loan, the lender can only take back the collateral used to secure the loan....

These events can include getting married, having a child, or losing your current health insurance coverage. You have a special time during which you can make changes to your health plan after one of these events. You may be asked to prove your eligibility for a special period and for a copy of your denial letter if you’re trying to apply because Medicaid or the Children’s Health Insurance Program (CHIP) turned you down....

Learn more about how a rights offering issue works and whether you should take advantage of one if you have the chance. Definition and Example of Rights Offering Issue A rights offering issue is the process of a public company giving its current shareholders the right to buy additional shares. These are often offered at a discount. A company might issue a rights offering when it needs to raise additional capital....

What Is a Statutory Non-Employee? The IRS also has a category of workers called “statutory nonemployees.” Currently, only three types of workers are considered in this category: direct sellers, licensed real estate agents, and certain companion sitters. Real estate agents and direct sellers are considered to be self-employed for tax purposes if substantially all of their services are related to direct sales. Companion sitters who aren’t employed by a service are also considered to be self-employed....

Definition and Example of a Subordination Clause In real estate, a subordination clause is the legal language establishing which lender gets paid first if a home goes into foreclosure. It most commonly appears in mortgage agreements and comes into play when a borrower refinances their home or takes out a home equity loan or a home equity line of credit (HELOC). There usually isn’t enough equity or money to pay off multiple loans, so a subordination clause establishes a lien hierarchy determining which lender gets paid first....

The amount of tax you’ll owe as the result of a taxable event can vary depending on what state you live in as well as federal tax law and requirements. Some states don’t impose an income tax. How Does a Taxable Event Work? The Internal Revenue Service (IRS) determines the rules for events and transactions that affect federal income tax liability for businesses and individuals. This includes taxable and nontaxable income, employee withholding, and capital gains....

Zero balance accounts are always tied to a main account, or concentration account, that facilitates transactions and processing, and sweeps money into the zero balance account as needed. Acronym: ZBA For example, let’s say you own XYZ Corporation. You have ZBAs set up for each of your departments—for example, human resources, marketing, finance, operations management, and IT. Instead of having to add money to those accounts each time a department needs to pay a vendor or make a purchase, the exact amount of money needed will be automatically moved from the main account to the appropriate ZBA to cover that day’s transactions....

Some policies use replacement cost instead of ACV to calculate your payout, but you must elect this provision on your policy. Otherwise, ACV is the amount of money your insurer will pay if your car or home is damaged beyond repair. If you total your car, the payout won’t be the same amount as what you paid for it. It will be for how much the vehicle was worth at the time of the accident....

Morsa Images / Getty Images In general, the younger you are, the higher the percentage of equities you should own. That is because you have a longer investment period in which to make up losses if they occur, and the stock market has generally trended upward over time. More seasoned investors might have a higher percentage of fixed income holdings and might be more reliant on regular income than on big stock gains....

For example, if you use your credit card to pay for gas at the pump, you will likely be prompted to input your billing address ZIP code. If you input the incorrect ZIP code, the authentication will fail, and the transaction will be declined. This is a form of credit card authentication to ensure—albeit imperfectly—that you, the individual presenting the card for payment, are the card owner. How Credit Card Authentication Works When you present your credit card to make a purchase, the merchant likely does not know if you are the actual cardholder....

Alternate name: Negative inflation The Consumer Price Index (CPI) is the most commonly used measure of inflation. CPI measures the prices of household goods and services in the economy. If CPI goes into a negative number, that’s deflation. The United States has experienced several periods of deflation. For example, deflation occurred in 2009 due to the Financial Crisis and the Great Recession in which the Consumer Price Index was -0.04%. During the Great Depression, U....