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Understanding common banking terms

Here's a quick guide to some of the most commonly used banking terms that you will find handy on your journey to become more financially independent.

Glossary of common banking terms

With a better understanding of common banking terms you can:

  • Demystify your bank statement and feel comfortable making everyday financial decisions
  • Easily compare savings, loans and credit offers from a range of providers
Your bank account and bank statement
Glossary Explanation
Account number Your bank account's unique number.
Available balance This is the money you have available to spend, taking into account any pending payments and excluding any cheques that haven't yet cleared. It also includes any arranged overdraft limit you may have agreed with your banking provider.
Deposit Money paid into your account is called deposit.
Pending transactions These are payments or deposits you've made – for example, with your debit card – that haven't yet been cleared or debited from your account.
Statement Your bank statement shows all the transactions that have taken place over a set period of time. It also shows any interest and fees that have been added to, or deducted from, your account.
Transfer This is when you send money between two accounts. You might make a transfer between two of your own accounts, for example, from an everyday bank account to a savings account. Moving money from your account to someone else's is also a transfer.
Withdrawal Any money taken out of your account is considered a withdrawal.
Your bank account and bank statement
Glossary Account number Account number
Explanation Your bank account's unique number. Your bank account's unique number.
Glossary Available balance Available balance
Explanation This is the money you have available to spend, taking into account any pending payments and excluding any cheques that haven't yet cleared. It also includes any arranged overdraft limit you may have agreed with your banking provider. This is the money you have available to spend, taking into account any pending payments and excluding any cheques that haven't yet cleared. It also includes any arranged overdraft limit you may have agreed with your banking provider.
Glossary Deposit Deposit
Explanation Money paid into your account is called deposit. Money paid into your account is called deposit.
Glossary Pending transactions Pending transactions
Explanation These are payments or deposits you've made – for example, with your debit card – that haven't yet been cleared or debited from your account. These are payments or deposits you've made – for example, with your debit card – that haven't yet been cleared or debited from your account.
Glossary Statement Statement
Explanation Your bank statement shows all the transactions that have taken place over a set period of time. It also shows any interest and fees that have been added to, or deducted from, your account. Your bank statement shows all the transactions that have taken place over a set period of time. It also shows any interest and fees that have been added to, or deducted from, your account.
Glossary Transfer Transfer
Explanation This is when you send money between two accounts. You might make a transfer between two of your own accounts, for example, from an everyday bank account to a savings account. Moving money from your account to someone else's is also a transfer. This is when you send money between two accounts. You might make a transfer between two of your own accounts, for example, from an everyday bank account to a savings account. Moving money from your account to someone else's is also a transfer.
Glossary Withdrawal Withdrawal
Explanation Any money taken out of your account is considered a withdrawal. Any money taken out of your account is considered a withdrawal.
Accessing your money
Glossary Explanation
Arranged and unarranged overdrafts

An arranged overdraft is when you agree with your account provider in advance that you may borrow money when there is no money left in your account. You will agree upon an arranged overdraft limit – which is the maximum amount that can be borrowed. There is an interest you will need to pay on your overdraft, although sometimes overdraft limits may be initially interest-free.

An unarranged overdraft is when you borrow money when there is no money left in your account (or when you have exceeded your limit) and this has not been agreed upon in advance with the account provider.

Debit card This is a card you can use to make cash withdrawals from ATMs, and may also be used to pay for goods and services in person, online or over the phone. When you pay with your debit card, the amount of the transaction will be debited from your account.
Sort code / Branch code / BSB / routing number This is a unique code that identifies your bank branch.
Accessing your money
Glossary Arranged and unarranged overdrafts Arranged and unarranged overdrafts
Explanation

An arranged overdraft is when you agree with your account provider in advance that you may borrow money when there is no money left in your account. You will agree upon an arranged overdraft limit – which is the maximum amount that can be borrowed. There is an interest you will need to pay on your overdraft, although sometimes overdraft limits may be initially interest-free.

An unarranged overdraft is when you borrow money when there is no money left in your account (or when you have exceeded your limit) and this has not been agreed upon in advance with the account provider.

An arranged overdraft is when you agree with your account provider in advance that you may borrow money when there is no money left in your account. You will agree upon an arranged overdraft limit – which is the maximum amount that can be borrowed. There is an interest you will need to pay on your overdraft, although sometimes overdraft limits may be initially interest-free.

An unarranged overdraft is when you borrow money when there is no money left in your account (or when you have exceeded your limit) and this has not been agreed upon in advance with the account provider.

Glossary Debit card Debit card
Explanation This is a card you can use to make cash withdrawals from ATMs, and may also be used to pay for goods and services in person, online or over the phone. When you pay with your debit card, the amount of the transaction will be debited from your account. This is a card you can use to make cash withdrawals from ATMs, and may also be used to pay for goods and services in person, online or over the phone. When you pay with your debit card, the amount of the transaction will be debited from your account.
Glossary Sort code / Branch code / BSB / routing number Sort code / Branch code / BSB / routing number
Explanation This is a unique code that identifies your bank branch. This is a unique code that identifies your bank branch.
Common debit/credit terms
Glossary Explanation
Credit and debit

Credit is the amount of money you have available in your bank account. Your account is credited when money is paid into it.

Credit is also a term that refers to your borrowing, loans and debt.

A debit is money withdrawn from your bank account. It could be a payment you have made, or cash withdrawn at an ATM.

When your account is 'in debit', it means it is overdrawn.

 

Your bank statement includes 'credits' and 'debits', which refer to the individual 'money in' and 'money out' transactions that have occurred in given time period.

Credit rating / score A credit rating tells a lender about your credit history and helps them assess how much of a risk lending to you would be. This is also sometimes referred to as a credit score.
APR/Comparison Rate

APR (Annual Percentage Rate) or Comparison Rate refers to the combination of interest charged and any additional charges that you will pay on a loan or offer of credit. Lenders must tell you the APR before you sign a credit agreement with them.

You can use the APR to compare the real costs of loans from a number of providers.

PA PA (Per Annum) is the annual interest rate and is generally used for savings and credit accounts.
Common debit/credit terms
Glossary Credit and debit Credit and debit
Explanation

Credit is the amount of money you have available in your bank account. Your account is credited when money is paid into it.

Credit is also a term that refers to your borrowing, loans and debt.

A debit is money withdrawn from your bank account. It could be a payment you have made, or cash withdrawn at an ATM.

When your account is 'in debit', it means it is overdrawn.

 

Your bank statement includes 'credits' and 'debits', which refer to the individual 'money in' and 'money out' transactions that have occurred in given time period.

Credit is the amount of money you have available in your bank account. Your account is credited when money is paid into it.

Credit is also a term that refers to your borrowing, loans and debt.

A debit is money withdrawn from your bank account. It could be a payment you have made, or cash withdrawn at an ATM.

When your account is 'in debit', it means it is overdrawn.

 

Your bank statement includes 'credits' and 'debits', which refer to the individual 'money in' and 'money out' transactions that have occurred in given time period.

Glossary Credit rating / score Credit rating / score
Explanation A credit rating tells a lender about your credit history and helps them assess how much of a risk lending to you would be. This is also sometimes referred to as a credit score. A credit rating tells a lender about your credit history and helps them assess how much of a risk lending to you would be. This is also sometimes referred to as a credit score.
Glossary APR/Comparison Rate APR/Comparison Rate
Explanation

APR (Annual Percentage Rate) or Comparison Rate refers to the combination of interest charged and any additional charges that you will pay on a loan or offer of credit. Lenders must tell you the APR before you sign a credit agreement with them.

You can use the APR to compare the real costs of loans from a number of providers.

APR (Annual Percentage Rate) or Comparison Rate refers to the combination of interest charged and any additional charges that you will pay on a loan or offer of credit. Lenders must tell you the APR before you sign a credit agreement with them.

You can use the APR to compare the real costs of loans from a number of providers.

Glossary PA PA
Explanation PA (Per Annum) is the annual interest rate and is generally used for savings and credit accounts. PA (Per Annum) is the annual interest rate and is generally used for savings and credit accounts.
Payments
Glossary Explanation
Direct Debit This is when you give a company permission to take money from your bank account on an agreed date. The company can change the amount or date, but they must notify you of the change first. Direct Debits are often used to pay household utility bills like gas or electricity.
Payee This is a company, or person, that you're paying to.
Recurring transactions

These are payments you've agreed to, that a business can take from your debit or credit card when needed.

These transactions can be difficult to keep track of, because they may vary in both amount and frequency. You have a right to cancel, however, and can switch to a payment method that's easier to manage, like a Direct Debit.

Standing order This is an instruction you give to your bank to make a regular, fixed payment from your bank account. For example, you might set up a standing order to pay your monthly rent. Unlike a Direct Debit, the amount paid by a standing order is fixed and the only person who can change it is you.
Payments
Glossary Direct Debit Direct Debit
Explanation This is when you give a company permission to take money from your bank account on an agreed date. The company can change the amount or date, but they must notify you of the change first. Direct Debits are often used to pay household utility bills like gas or electricity. This is when you give a company permission to take money from your bank account on an agreed date. The company can change the amount or date, but they must notify you of the change first. Direct Debits are often used to pay household utility bills like gas or electricity.
Glossary Payee Payee
Explanation This is a company, or person, that you're paying to. This is a company, or person, that you're paying to.
Glossary Recurring transactions Recurring transactions
Explanation

These are payments you've agreed to, that a business can take from your debit or credit card when needed.

These transactions can be difficult to keep track of, because they may vary in both amount and frequency. You have a right to cancel, however, and can switch to a payment method that's easier to manage, like a Direct Debit.

These are payments you've agreed to, that a business can take from your debit or credit card when needed.

These transactions can be difficult to keep track of, because they may vary in both amount and frequency. You have a right to cancel, however, and can switch to a payment method that's easier to manage, like a Direct Debit.

Glossary Standing order Standing order
Explanation This is an instruction you give to your bank to make a regular, fixed payment from your bank account. For example, you might set up a standing order to pay your monthly rent. Unlike a Direct Debit, the amount paid by a standing order is fixed and the only person who can change it is you. This is an instruction you give to your bank to make a regular, fixed payment from your bank account. For example, you might set up a standing order to pay your monthly rent. Unlike a Direct Debit, the amount paid by a standing order is fixed and the only person who can change it is you.

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