A financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. It involves a change in the status of the finances of two or more businesses or individuals.
This is the most common type of financial transaction. An item or good is exchanged for money. This transaction results in a decrease in the finances of the purchaser and an increase in the benefits of the sellers. An example is a real estate transaction.
This is a slightly more complicated transaction in which the lender gives a single large amount of money to the borrower now in return for many smaller repayments of the borrower to the lender over time, usually on a fixed schedule. The smaller delayed repayments usually add up to more than the first large amount. The difference in payments is called interest. Here, money is given for not any specific reason.
This is a combined loan and purchase in which a lender gives a large amount of money to a borrower for the specific purpose of purchasing a very expensive item (most often a house). As part of the transaction, the borrower usually agrees to give the item (or some other high value item) to the lender if the loan is not paid back on time. This guarantee of repayment is known as collateral.
A bank is a business that is based almost entirely on financial transactions. In addition to acting as a lender for loans and mortgages, banks act as a borrower in a special type of loan called an account. The lender is known as a customer and gives unspecified amounts of money to the bank for unspecified amounts of time. The bank agrees to repay any amount in the account at any time and will pay small amounts of interest on the amount of money that the customer leaves in the account for a certain period of time. In addition, the bank guarantees that the money will not be stolen while it is in the account and will reimburse the customer if it is. In return, the bank gets to use the money for other financial transactions as long as they hold it.
This is a special combination of a purchase and a loan. The seller gives the buyer the good or item as normal, but the buyer pays the seller using a credit card. In this way, the buyer is paying with a loan from the credit card company, usually a bank. The bank or other financial institution issues credit cards to buyers that allow any number of loans up to a certain cumulative amount. Repayment terms for credit card loans, or debts vary, but the interest is often extremely high. An example of common repayment terms would be a minimum payment of the greater of $10 or 3% every month and a 15-20% interest charge for any unpaid loan amount. In addition to interest, buyers are sometimes charged a yearly fee to use the credit card.
In order to collect the money for their item, the seller must apply to the credit card company with a signed receipt. Sellers usually apply for many payments at regular intervals. The seller is also charged a fee of normally 1-3% of the purchase price by the credit card company for the privilege of accepting that brand of credit card for purchases.
Thus, in a credit card purchase, the transfer of the item is immediate, but all payments are delayed. The credit card holder receives a monthly account of all transactions. The billing delay may be long enough to defer a purchase payment to the bill after the next one.
This is a special type of purchase. The item or good is transferred as normal, but the purchaser uses a debit card instead of money to pay. A debit card contains an electronic record of the purchaser's account with a bank. Using this card, the seller is able to send an electronic signal to the buyer's bank for the amount of the purchase,and that amount of money is simultaneously debited from the customer's account and credited to the account of the seller. This is possible even if the buyer or seller use different financial institutions. Currently, fees to both the buyer and seller for the use of debit cards are fairly low because the banks want to encourage the use of debit cards. The seller must have a card reader set up in order for such purchases to be made. Debit cards allow a buyer to have access to all the funds in his account without having to carry the money around. It is more difficult to steal such funds than cash, but it is still done. See also skimming and shoulder surfing.
- Financial transaction tax
- ^ (French) Jean de Maillard, Un monde sans loi : La criminalité financière en images, 1999, Éditions Stock, ISBN 2-234-04827-3, page 28.
- ^ (French) File "L'Ogre de la Finance" published in Revue québécoise Relations, june 2009, linked at http://www.assnat.qc.ca/fra/39Legislature1/DocumentsDeposesCommissions/CFP/CFP-49_2009_05_27_11_38.pdf
Wikimedia Foundation. 2010.
Look at other dictionaries:
financial transaction — finansinė operacija statusas T sritis Gynyba apibrėžtis Su pinigais susijusi operacija. atitikmenys: angl. financial transaction šaltinis NATO mokymų ir pratybų finansavimo terminų žodynas AAP 43(1), 2009 … Lithuanian dictionary (lietuvių žodynas)
Financial transaction — Any transaction which actually effects an account balance. These transactions can be related to personal and/or impersonal accounts … International financial encyclopaedia
financial transaction — business deal involving money … English contemporary dictionary
Financial Transaction Services — Financial Transaction Services, kurz FinTS, ist ein deutscher Standard für den Betrieb von Online Banking. FinTS ist eine Weiterentwicklung des Online Banking Standards HBCI. Derzeit unterstützen die Genossenschaftsbanken, die Sparkassen, die… … Deutsch Wikipedia
Financial transaction card — An ISO term. A card used to identify the card issuer and the cardholder to facilitate the financial transaction and to provide input data for such a transaction … International financial encyclopaedia
Financial Transaction Services (FinTS) — Home Banking Spezifikation, die 2003 vom ⇡ Zentralen Kreditausschuss (ZKA) verabschiedet wurde. F. beinhaltet das Sicherheitsverfahren ⇡ Home Banking Computer Interface (HBCI) sowie das ⇡ PIN TAN Verfahren. Mit FinTS wurden die… … Lexikon der Economics
Transaction Workflow Innovation Standards Team — (Twist) is a not for profit industry standards group. It does not charge anything for involvement. The main goal of Twist is to create non proprietary XML message standards for the financial services industry. To this end it provides a message… … Wikipedia
Financial services — refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance… … Wikipedia
Transaction — A transaction is an agreement, communication, or movement carried out between separate entities or objects, often involving the exchange of items of value, such as information, goods, services and money.*Financial transaction *Database… … Wikipedia
Transaction authentication number — A Transaction authentication number or TAN is used by some online banking services as a form of single use passwords to authorize financial transactions. TANs are a second layer of security above and beyond the traditional single password… … Wikipedia