The key banking terms you need to know
Banking speak can feel confusing, but getting to know the basics can help you stay in control of your finances. Let’s bust the jargon of banking in under two minutes – from the experts at LOQBOX.
- APR. The Annual Percentage Rate of interest. By including additional payments beyond interest rates, it shows the true cost of a loan or mortgage.
- Bank statement. Details of monthly transactions from your bank, either paper or online.
- Certified document. Photocopied document signed and dated by a professional (doctor, solicitor, teacher, etc.) confirming they’ve seen the genuine original.
- Charge. Money taken by your bank. Overdraft fees, missed Direct Debit charges, business account charges, etc.
- Credit scoring. A way lenders determine someone’s creditworthiness, and decide whether to lend to them, using data from credit applications. Some answers get a higher score than others.
- Creditworthiness. As determined by a lender on a case-by-case basis. You may be considered creditworthy according to one lender’s criteria, but not another’s.
- County Court Judgement (CCJ). A punishment issued to those in significant debt, recorded nationwide and on the individual’s credit file by agencies like Experian and Equifax. The credit file also shows when the debt has been repaid.
- Direct Debit. Regularly payments taken from a bank account. Set up by the recipient, they can vary in frequency and amount.
- Endowment mortgage. A mortgage where only interest is paid over the term and the capital is repaid from an endowment policy at the end.
- Interest. A percentage of money paid over time – usually in line with a bank’s base rate of interest. Interest paid on a loan is the cost of borrowing. Interest on savings is your reward for investing.
- ISA. An Individual Savings Account available to UK residents over 18 (16 and 17-year-olds can get mini ISAs). There are cash, stocks and shares, or life insurance ISAs, and the amount you can pay in over a year is limited.
- Money laundering. Proceeds from illegal activities put into a bank account to be accessed more easily by criminals and terrorists.
- Payee. The person getting paid in a transaction, often applying to cheques. (The person making the payment is the payer.)
- Phishing. Using the internet to fraudulently obtain people’s personal account details, usually to illegally make money.
- Overdraft. A negative amount in a bank account. Overdraft limits can be authorised for an agreed amount, but banks may not offer the facility to those deemed a risk.
- Standing order. A regular, fixed payment from a current account, set up by the account holder.
This post was written and compiled by the credit experts behind LOQBOX – a completely free way to build your credit history by saving a little each month. To sign up or read more about the clever way LOQBOX works, head to LOQBOX.co.uk.
This is part of our Two-minute Money blog series – unlocking the secrets of the financial system, two minutes at a time.