Banking Jargon Debunked: What Does It Mean?

Financial agreements and products come full of banking jargon and terms that most of us don’t understand.

In fact, it’s safe to say that up until a few years ago, some of the banking jargon used in my mail may as well have been written in Japanese for all I understood about it.

I recently asked my work colleagues to explain what an APR is to me, around 90% of the them had no clue, however every single one of them had a credit card carrying one.

I’m a huge advocate of financial education, and in my humble opinion a lender should not be able to provide you with any credit until they have explained it all properly and you know exactly what t is you’re signing into.

But, as we are still lagging way behind when it comes to financial education in the UK, I thought I would put together a jargon busting guide to explain what some of the most common terms actually mean.




Banking jargon buster

APR

An APR is the annual percentage rate of interest and is usually found on credit cards, loans and mortgages.

You can find it displayed in brackets on your credit agreement and it represents the true cost of the loan as it shows the additional payments beyond the interest rate.

Bank statements

This is something you receive from your bank detailing your monthly income and expenditure for the relevant account.

You can request to have them sent as and when you need them, but you should still receive them monthly.

Obviously, with the surge in digital online services, you can also opt to have an online account and stop receiving paper statements in the post too.

Certified documents

This refers to photocopies of the original documents you have had signed by a professional i.e. a bank official, doctor, post office official, solicitor, accountant or teacher.

Whoever is signing your documents must also state that they have seen a copy of the original document and verify that they are genuine copies.

They must also date the document and put their full name and address plus their occupation.




Charges

One we all dread seeing!

This is what your bank has charged you for services rendered.

However, charges may also include unarranged overdraft fees, missed Direct Debit fees, a penalty for a bounced cheque, interest charges on an overdraft, plus any charges associated with a business account.

Credit scoring

This is the rating given to a person or business from the credit industry.

A score is determined from an individual’s credit history and these details are all available from specialist organisations known as credit reference agencies, such as Experian and Equifax.

Related Articles:

20 No fuss ways to build your credit rating

15 Things that could impact negatively on your credit score

How your credit score affects the cost of borrowing

How to build a credit file worthy enough for a set of bankers

Creditworthiness

This is the decision the organisation you have applied for credit from will make to determine whether or not to take you on.

Every lender has their own criteria so you should be aware that you may be considered creditworthy by one, but not with another, as one may see you as a higher risk.

County Court Judgment (CCJ)

Something you want to avoid at all costs!

This is when a judge in a Small Claims Court or County Court finds against an individual and issues them with a CCJ to force them to pay legally.

A CCJ is recorded on your credit file with organisations such as Experian and Equifax and is visible for any potential lender to see for six years.

Having a CCJ issued against you will severely hamper your chances of obtaining credit in the future as you appear less creditworthy and more of a risk.

Once a CCJ has been paid, it will show on your credit file as such, which should reduce the risk associated with you.

However, it is advisable to do anything possible to prevent you receiving a CCJ.




Direct Debit

This is an amount of money taken as an automated payment from your bank account.

It is set up with a specific recipient and can vary in amounts and dates it is taken.

See – How I turned three current accounts into a saving machine

Endowment mortgage

With this type of mortgage, you only pay the interest over the term of the mortgage and the capital is repaid at the end of the term from an endowment policy.

Interest

An amount paid on money.

If you were to borrow money, interest would be paid on that loan.

If you invest money, interest will be paid where appropriate to the investment.

Interest rates are usually kept in line with accordance to the banks basic rate of interest and is expressed in percent.

ISAs

Meaning an individual savings account.

These are available for UK residents over the age of 18, although mini ISAs are available for 16 and 17 year olds.

There are limits that apply in terms of the amount of contributions you’re able to make each tax year and not to the total in the ISA itself.

ISAs can be cash, stocks and shares or life insurance.

Money laundering

This is money gained from criminal activity that has been placed into a bank account so it can be accessed safely by criminals making it ‘clean money’.

Money laundering makes the proceeds of illegal activity easier to access and spend.

Overdraft

This means you have minus figures in your bank account.

It can be authorised with, and agreed by the bank for a set amount you are able to borrow.

If your overdraft is unauthorised or unarranged by your bank, you will face pretty heavy charges and you could appear too high risk for your bank to authorise the facility for you in the future.




Payee

This is the person who receives a payment from another person or business.

It often applies to cheques.

If you are the person receiving the cheque, you are the payee, if you wrote the cheque you are the payer.

Phishing

This is when a criminal uses the internet in an attempt to obtain a person’s details fraudulently so they may access their accounts, usually to withdraw money from or to order items online.

Standing order

This is a regular payment paid out of your bank account which is a set amount and date and is set up by the account holder.

Final word

I hope that has helped debunk some of the most common banking jargon for you.

I could have gone on with this list, but this is the most common terms you are likely to see.

If you do come across anything that you need help explaining, just drop me a message and I’m happy to help you debunk any of the other banking jargon you have stumbled across.

Do you understand banking jargon?

Pin for later

Financial agreements and products come full of banking jargon and terms that most of us don't understand. In fact, it's safe to say that up until a few years ago, some of the banking jargon used in my mail may as well have been written in Japanese for all I understood about it. I recently asked my work colleagues to explain what an APR is to me, around 90% of the them had no clue, however every single one of them had a credit card carrying one. I'm a huge advocate of financial education, and in my humble opinion a lender should not be able to provide you with any credit until they have explained it all properly and you know exactly what t is you're signing into. But, as we are still lagging way behind when it comes to financial education in the UK I thought I would put together a jargon busting guide to explain what some of the most common terms actually mean.

 




Thinking Thrifty

Thinking Thrifty

David Jack Taylor is the founder and editor of the Thinking Thrifty blog. An award winning personal finance and lifestyle blogger, he shows how it is possible to live extremely well for less.
Thinking Thrifty
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