This week we’re going to try and bust some jargon – the financial terms that sometimes overwhelm us! You may find this easy, but I’m hoping you are doing this course with a group, so don’t assume everyone is where you are.

First, let’s look at overdrafts. What is an overdraft?

  1. A facility allowing you to spend more money from your bank account than you have in it. You may be charged interest and fees.
  2. Where you can transfer some of your debts from one credit card to a new one and pay the sum off.
  3. The minimum amount you must pay each month on your credit or store card account
”Reveal
A. A facility allowing you to spend more money from your bank account than you have in it. You may be charged interest and fees.

What is accrued interest?

  1. The total amount you have to pay back against a long term loan
  2. The amount of interest that has accumulated (grown) on a loan or an investment over time
  3. The total amount in your bank or savings account
”Reveal
B. The amount of interest that has accumulated (grown) on a loan or an investment over time

Here are some more:

Accrued interest The amount of interest that has accumulated (grown) on an investment over time.
AER Annual Equivalent Rate: The rate of interest earned within a year, irrespective of how often interest is added to your account. The higher the AER, the better the return.
APR Annual Percentage Rate: The overall cost of borrowing if you owe money on your credit card, loan or overdraft.
Asset Anything that is valuable, useful or earns money. In money terms this is used when talking about investments.
Balance transfer Where you can transfer some of your debts from one credit card to a new one and pay the sum off, usually at a 0% interest rate for a set period time. After this period ends, the balance begins to attract interest.
Bank charge A fee payable to banks for going overdrawn or for bouncing payments (Direct Debits, cheques or standing orders). The penalty amounts differ from bank to bank.
Cleared and uncleared balances A cleared balance shows the money that has already reached your account and is ready for you to use. An uncleared balance includes the money in transit to your account but not yet available.
Compound interest Interest that is calculated on the original amount borrowed or saved, as well as any interest already charged or earned.
Consolidation loan Rolling all your debts into a single loan, usually with a lower monthly payment and a longer repayment period, which could cost you more in the long run.
Credit Buying on credit is a form of borrowing. It includes paying by credit card or store card, hire purchase, and other credit agreements including interest-free credit where you ‘buy now pay later’.
Credit check A search of your borrowing record, also known as your credit history. A bank or other organisation carries out a credit check on a person when deciding whether to lend them money or to open a bank account in their name.
Credit scoring/credit rating The system your card issuer uses to decide whether to provide you with a card, and to set your credit limit. Credit scoring works by awarding points to the information you provide on your application.
Emergency fund Money you put aside to help you pay bills and buy important items if you are short of cash.
Fee-based financial adviser An adviser who charges a fee, either at an hourly rate or a set fee for giving financial advice.
Interest Interest refers to both the charge made by lenders on money you borrow from them and the amount earned by your savings. Interest can be variable (goes up or down) or be fixed.
Loan shark These unlicensed money-lenders are working illegally.
Minimum payment The amount you must pay each month on your credit or store card account to keep to the terms of the agreement.
Outstanding balance Any money you owe on a credit or store card.
Overdraft/overdrawn A facility allowing you to spend more money from your bank account than you have in it. You may be charged interest or fees that may be daily or monthly, or interest and fees.
Phishing Fake emails trying to con you into giving your personal details.
Priority debts Debts that should be paid first, to stop you potentially losing your home or getting a criminal record.
Pyramid scheme Sells false promises of quick and easy money.
Repayments The amount you have to pay back to the lender (usually monthly) when you borrow money.
Secured When a loan is ‘secured’ on your home, it means the lender can repossess your home and sell it to get its money back if you don’t keep up your repayments.
Utilities Services provided to you such as gas, electricity or water.
Variable interest rate Interest rates offered by banks and financial institutions on loans or deposits which are liable to change according to circumstances.

Adapted from: the UK Financial Services Authority

Question: What other terms would you add to this list of confusing jargon? Ask your small group, or search Google for answers.


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