A
Account
An account is a secure facility provided by your bank or building society that keeps money for you.
Account History
This history of a bank account, which records a number of factors involved in the operation and management of your account, including the number of times you have been over the credit/overdraft limit.
Account Number
A unique number that is assigned to your bank account so that the banks can determine which account it belongs to. It can usually be found on your bank statements and cheques.
Accrued Interest
Interest that has been earned on a sum of money (or balance of an account) but has yet to be paid to the account holder.
AER
An abbreviation for 'Annual Equivalent Rate', an indication of what the interest rate would be if savings interest were to be paid and added to savings at the year end. Higher AERs mean a better rate of return on your money.
Annuity
Typically sold as an investment for retirement purposes, an annuity is a life insurance plan that is provided by insurance companies and brokers.
Appreciate
When money or an item increases in value we call this 'appreciation'. It is usually a phrase that is used to refer to items of value, such as shares, stocks etc., which are worth more than you originally paid for them.
APR
An abbreviation for 'Annual Percentage Rate', which indicates what percentage of interest you will need to repay on any money that you borrow, including credit cards, loans, mortgages etc. The higher the APR, the more money you will need to pay back, annually.
Arrangement Fee
These are fees that are paid to either individuals or organisations for arranging a service, for example life insurance policies or mortgages.
Arrears
Money owed that is not paid by the date that it is due.
Assets
All items of value that you may own, including money, properties, jewellery, vehicles. This does not include items that are still being paid for using a loan.
ATM
Automated Teller Machine, commonly referred to as a 'Cashpoint' or 'Cash Machine', which lets you withdraw money from your account. It is typical for an ATM to restrict the amount of money you can withdraw each day, e.g. £250 for security purposes.
B
Balance
The amount of cash that is available to you in your account, or the amount that you currently owe on a loan or debit card that needs to be repaid.
Balloon Payment
The last, and final payment to the lender, which is typically larger than all other repayments made throughout the contract.
Bank
A privately or publicly-owned financial institution that provides the public with a range of financial services, including bank accounts, mortgages, insurance and personal/business loans.
Bank Charges
Fees that the bank may charge for provision of services offered to the account holder. Charges may include bounced cheques, overdraft interest etc.
Bankers Draft
A cheque that is made out to an individual or organisation to pay for something. It is drawn on the bank, meaning that they cannot bounce.
Bankruptcy
Declaring yourself (or your business) bankrupt means that you can no longer settle your debts, and that any assets you may have may be seized in order to pay off any outstanding debts. After a year all outstanding debts are 'written off'.
Basic Bank Account
An account offered by the bank that does not have the usual facilities such as overdraft or cheque books. They are useful for those who may struggle to obtain a current account due to poor credit rating or bankruptcy.
Bond
'Bonds' are issued by major companies that are in real terms 'IOUs' that are owed to you.
Bounced Cheque
A check that has been returned to its payee because there were not enough funds in the bank account. The beneficiary will not receive any funds. Banks normally charge a nominal fee for bounced cheques.
Budget
A financial plan that you put together to help you to manage your money.
C
Cashback
Cashback allows you to withdraw cash from your bank account once you have paid for products (typically at a supermarket or retail outlet). The total amount - including the items you have bought - are taken from your current account once the transaction is successful.
Charge Cards
Cards similar to credit cards where the balance needs to be paid each period on the due date.
Cheque
An instruction - either handwritten or printed - to the bank to pay an individual, company or organisation the amount stated on the instruction itself.
Cheque Book
A booklet of cheques that have been pre-printed with a template, allowing goods and services to be paid for. The cheques come pre-printed with account number, sort code and unique check number.
Chip and PIN
A system of payment where a small electronic chip is placed inside the credit or debit card. The PIN (Personal Identification Number) is used to verify you as the account holder.
County Court Judgement
If you have defaulted against a credit agreement and failed to pay back a loan or credit, the lender may take out a CCJ against you. A court judge makes the judgement, which is recorded by credit agencies Experian and Equifax onto your credit report.
Credit Rating
A 'score' that Experian and Equifax give you that assesses your credit-worthiness. Potential lenders can check your credit rating to gauge how much of a risk you are before deciding to lend you money. (www.equifax.co.uk and www.experian.co.uk).
Current Account
An everyday bank account that enables you to deposit money or withdraw money at any given time without having to give notice of your intentions.
D
Default
Failure to meet a repayment to a creditor, upon which they may send you a default notice informing you that they will take further action to recover the debt.
Direct Debit
A regular payment set up by the organisation that you wish to pay. The bank releases funds to the organisation from your account at set periods, for example monthly.
F
Faster Payments
Faster Payments is a system that banks follow to enable transactions to take place quicker - often in minutes or hours - between branches, instead of the previous system which required several days. Not all banks are part of the Faster Payment Service. See a list of current members who allow Faster Payments.
Financial Adviser
A financial adviser is either a company or individual who offers advice about your financial circumstances, offering products and/or services that may help you to decide how best to grow your savings, make investments, or manage your money. All advisers must be authorised and regulated by the Financial Conduct Authority (FCA).
Fixed Rate
Fixed rate means that the interest rate on a product (e.g. a mortgage or personal loan) will remain static for a set period - sometimes for the length of the term or for a temporary amount of time, usually as 'teasers'.
G
Guarantor
An individual or organisation that promises to pay off a debt should the borrower be unable to repay the amount due.
H
Hire Purchase
A loan that is taken out in order to buy something, usually mid-range consumer items such as household goods, vehicles etc. Repayments are usually every month until the loan has been paid (with interest).
I
Identity Theft
Identity theft occurs when another person is able to use information known only to you in order to get credit, loans or other financial services in your name. This is an illegal activity and often accompanied by a prison sentence. Ensure that you keep your documents safe, or shredded securely once disposed of. See our article how to avoid being a victim of identity fraud.
Income Tax
The amount of money that the government (via the Inland Revenue) taxes your personal income. Money raised goes towards the cost of running public services, such as education, defence, welfare etc. The rate of income tax is currently 20%.
Inheritance
Money that is given to another individual after someone dies is called inheritance, and usually subject to a tax (inheritance tax).
Interest Free
When the lender offers products or services (such as a personal loan) that is 'interest free', this means that the lender will not charge any interest on the loan amount.
Internet Banking
A way of managing your current and savings accounts using the internet instead of visiting or phoning your bank. Most transactions are available to you over internet banking, including money transfers, changing PIN numbers, paying bills, setting up standing orders etc.
ISA
An abbreviation for 'Individual Savings Accounts', a tax-efficient way of saving money. ISAs are usually invested in low-risk stocks and shares that offer a steady rate of interest. You are allowed to invest up to £11,280 per tax year (2013 figures), of which up to a half of the amount can be invested in a cash ISA.
L
Lease
A way of financing a product (such as a vehicle) that allows you to use the product. The product is returned to the lender at the end of the term.
Lease Purchase
A loan agreement for a high-value purchase (such as a vehicle), similar to Hire Purchase. However, the ownership can usually be transferred to the individual leasing the item once the end of the contract has been reached.
Legal Tender
Legal tender is the recognised money/currency that is used in each country in order to purchase services and goods. The UK's legal tender is Pound Sterling (£).
LINK
A network of cash machines (ATMs) across the UK that is run by a range of financial organisations, including banks and building societies. Most debit cards are accepted.
Loan Shark
A person or organisation that lends money without a valid 'customer credit licence'. Loan sharks are illegal, and may charge you extortionate interest rates and use intimidation to recover the money. Never borrow money from a loan shark.
M
Mortgage
Unless you have the full amount of cash to pay for a house, you will require a mortgage, a legal agreement whereby the bank or building society will lend you the money to purchase the property with interest charged on the loan.
O
Overdraft
A pre-arranged overdraft is a facility that is set up on your account that enables you to withdraw more than your balance, letting you borrow more than you have. Unauthorised overdrafts can often incur extra penalty charges and interest rates.
P
Payee
The individual who receives a payment.
Payer
The individual who makes a payment.
Pension
An investment plan that enables individuals to plan an income, lump sum (or both) after they retire.
Personal Bankers
Banking specialists within a bank branch that can help you with a range or products/services or to help you with any questions you may have about managing your finances.
Personal Loan
A specified amount of money lent by a bank or third-party lender that is not secured against an asset, such as property. They can also be referred to as 'unsecured loans'.
Phishing
An internet scam that attempts to get you to click on a link in an email (or website) to divulge your personal information, for the purpose of gaining access to your account. The phishing webpages are often exact duplicates of the official bank, but personal details (such as login details) are sent back to the fraudster who can use the details to access the official bank. If you are unsure whether a web page is real or a phishing attempt, always contact your bank who will be happy to help you.
PIN
An abbreviation for Persoanl Identification Number, which is a secret number used with a cash card at an ATM in order to withdraw money or use a number of financial services. The PIN is also used to pay for services or goods at retail outlets.
Portfolio
The list of different investments that are held by you or your company.
S
Savings Account
A bank account provided to you that enables you to save money. Some banks (especially building societies) require you to give notice of your intention to withdraw money from your savings account.
Standing Order
A regular payment set up by the person that is in control of the account, as opposed to a direct debit, which is set up by an organisation. Payment dates can be changed by the account holder at any time.
Stock Exchange
A financial market where stocks, bonds, shares and gilts are traded, i.e. bought and sold.
U
Unpaid Transaction Fee
A fee that is charged by a bank when an item is returned unpaid, usually as a result of insufficient funds being available in your account. The Unpaid Transaction Fee is charged per day.
Unsecured Debt
A debt (typically from a credit card, bank loan or overdraft) that ensures that your creditor cannot repossess your property in the event that you cannot pay it back.
W
Working Tax Credit
A monetary top-up given by the government for those who are working but on a lower rate of income.