Transaction
Definition
In banking, a transaction is any action that results in a change to the financial status of an account, including deposits, withdrawals, transfers, or payments.
Detailed Explanation
Transactions are the critical activities because they involve the movement of money or money’s worth between individuals, businesses, or accounts. Each transaction is recorded in the financial records of the involved parties to ensure accuracy and accountability. Banking transactions can be categorized into several types: deposits (adding money to an account), withdrawals (taking money out of an account), transfers (moving money from one account to another within or across banks), and payments (settling a debt or paying for a service/product).
Transactions can be conducted through various methods, including physical (over the bank counter), electronic (online banking or ATMs), and via checks or credit, or debit cards. Modern banking systems rely heavily on electronic transactions, which provide convenience, speed, and enhanced security. Each transaction typically involves two main components: the debit, where funds are deducted, and the credit, where funds are added, ensuring the banking system’s balance.
Example
Maria transfers $500 from her savings account to her checking account using her bank’s mobile app. This transaction reduces her savings balance and increases her checking account balance by the same amount.
Key Articles Related To Transactions
Related Terms
Debit: An accounting entry that results in either an increase in assets or a decrease in liabilities on a company’s balance sheet.
Credit: In banking, a credit transaction increases the balance of an account.
Electronic Funds Transfer (EFT): The electronic exchange or transfer of money from one account to another, either within the same financial institution or across different institutions.
Ledger: The principal book or computer file for recording and totaling economic transactions measured in terms of a monetary unit of account by account type.
FAQs
How can I track my banking transactions?
Most banks provide online banking services where you can log in to view and manage your transactions; additionally, regular bank statements, either electronic or paper, also offer a summary of all account transactions.
Are there any limits on the number of transactions I can perform?
Yes, some accounts have transaction limits, especially savings accounts, which may have limits on the number of withdrawals or transfers to prevent excessive use.
What should I do if I notice an unauthorized transaction in my account?
You should immediately report any unauthorized transactions to your bank to investigate and rectify the issue, possibly reversing the transaction and securing your account.
Editor: Colin Graves