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Banking 101 - Glossary

You may recognise some of these commonly-used terms from visits to your local bank - but do you know what they mean? We've put together a quick glossary to help you out… 

APR

Annual Percentage Rate, or the amount of interest and fees chargeable in a 12-month period for a debt/loan.

Available balance

The amount in your bank account that is available for you to spend. This takes into account any recent transactions that are yet to clear, such as debit card spending.

Balance

The actual total amount that's held in your bank account at any given time. There may be transactions that haven't yet cleared, so it's also important to check the available balance.

Bank statement

A written summary of your income and spending over a fixed period of time. Typically provided on a monthly basis.

Budget

A way of planning for the money you have coming in and going out.

Credit card

A plastic card providing credit up to a certain limit. It's used as a method of payment. An agreed minimum repayment of any credit used to make purchases on this card must be repaid at least once per month.

Current account

The most common type of bank account for your everyday banking activities, such as receiving your wages, withdrawing cash and paying for goods and services with your Debit card.

Debit card

A plastic card that can be used to purchase goods and services. The money spent will come straight out of your bank account.

Direct debit

Authorises an organisation to collect money from your account, usually on a specific date, allowing you to automate paying bills such as utilities, gym membership etc.

Finance charge

Financial institutions can have strict rules for using some of their products. If you fail to meet these then they can apply a bank charge, which automatically debits the money from your account.

Interest

The reward paid for saving money, and the 'cost' of borrowing money. For example, when using a credit card, the interest charged will mean you end up repaying more than you spend. If you put money into a savings account, interest received will mean you earn more than you put in. 

Joint account

A bank account shared by more than one person with equal rights in how it is used. 

Some joint accounts require both account holders to be present in order to complete a transaction. This is sometimes referred to as an 'and' joint account.

For others, only one of the account holders is required. This is referred to as an 'and/or' joint account. 

Mortgage

A financial product that enables many people to borrow the money needed to buy their own home.

Online banking

A method of banking that allows you to access your bank accounts round the clock online. You're able to make payments, transfer money and apply for certain financial products.

Overdraft

A borrowing facility on your current account that, with agreement from the bank, allows you to spend more than you have in the account up to an agreed limit. You may be charged a monthly fee for using your overdraft.

Standing order

An instruction to pay a specific amount from your bank account to another person's account. These payments will be processed automatically and can be made at a frequency of your choice - for example weekly or monthly. 

Two factor authentication

Where two forms of identification are required to access mobile banking, for example password and face ID.

Unauthorised overdraft

If you've withdrawn more money than you have in your account and you have no overdraft facility agreed, or you have taken out more than your authorised overdraft limit without agreement from the bank. Unauthorised overdrafts are often subject to charges and fees which can be very expensive.

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