Growing up, most of us aren’t taught very much in school about handling personal finance. There are no classes on how to manage a bank account or credit card, improve your credit rating or stay out of debt.
In fact, did you know that amongst the millennial population, only 38% feel financially stable?
There are no classes on how to manage a bank account or credit card, improve your credit rating or stay out of debt. In fact, did you know that amongst the millennial population, only 38% feel financially stable?
So, to help the millennial generation and beyond learn more about finance, here is my guide to understanding personal finance jargon.
Your account statement is a periodic summary of your account activity over a set period of time.
Most banks will provide you with a monthly summary, typically sent to your home via post or, more recently, made available as a pdf via your mobile banking app.
Annual Percentage Rate (APR)
APR is the official rate that is used to help you understand the cost of your borrowing.
It takes into consideration the interest rate and additional charges of a credit off (usually a credit card or loan). Before you sign a credit agreement, every lender must provide you with their APR.
Once you know the lenders APR you can compare the offerings of each lender and choose the one with the lowest value as this will be the cheapest to repay.
A bank holiday is a business weekday day, typically a Monday, when commercial banks closed to the public. Bank holidays are usually most relevant for physical banks as online banking services continue to operate as usual.
Bank holidays are worth noting in your calendar as any payments you are due to receive on this day, such as wages, will not be received on a bank holiday. Usually, payments due on a bank holiday will happen the Friday before.
Your bank card is the physical card attributed to your current account. This card will allow you to make chip and pin or contactless payments in stores, and the details take from the card are what will allow you to make online payments and purchases.
A bank transfer will allow to both send and receive money from other bank accounts provided they have your name, account number, and sort code.
Through this method, the money will often appear in your account instantaneously or in some cases, no more than a few hours after the transfer.
Your current account is a bank account that allows you to do everyday banking services, such as receiving money, paying bills and setting up direct debits for regular payments.
This differs from a credit account as the money in this account is money you currently own or have saved, not money that is loaned to you as credit.
In some countries, a current account is called a checking account.
A credit card is a form of personal loan wherein a bank makes available to you a certain amount of credit.
You can use this money to make purchases and pay bills etc. in times of need and will be responsible for repaying that money with a set amount of interest (dictated by your APR)
This is simply an agreement or contract that outlines the terms of your borrowing of credit from the bank.
You will also come across credit agreements in other personal finance situations, such as when taking out a loan or entering into contracted payments for things such as mobile phone contracts or purchases made on finance.
Your credit rating is a score that tells lenders how financially responsible you are, and this credit rating will inform the lender how likely you are to repay your debts so that the lender can make an informed decision on whether or not they wish to give you credit.
Your credit rating can improve or get worse depending on certain factors such as your borrowing and repayment habits, for example.
A Direct Debit is an authorization from you to your bank to pay an organization a set amount on specified dates for a certain amount of time.
This is most often used when paying for things such as a contract mobile phone or monthly subscription.
Once you have agreed, the money is deducted automatically. For most people, this is the simplest and easiest way to pay regular bills.
Debt is any amount of money that you owe your bank or an organization that is outstanding.
For example, any money owed on credit cards or loans or outstanding payments for purchases or bills.
Fees are charges that are imposed on your accounts by your bank or institution that you will have to pay on top of any money owed.
For example, interest on a credit card or loan is considered a fee, so are late repayment fees or overdraft usage fees.
A loan is a specified amount of credit that a bank or financial institution has agreed to lend you on the condition that you will repay the amount in full as well as any charges or fees accrued of the time of the loan.
Mastercard is the second most popular credit card provider in the world, with around 191 million active cardholders.
The company boasts excellent identity protection amongst its many benefits. Mastercard is instantly recognizable and accepted widely in most locations across the globe.
An overdraft is an extension of credit that is added to your current account to cover you in case you run over your available funds.
This money will need to be repaid to the bank. There will also likely bee a fee charged for using your overdraft. There are also different types of overdraft that you can get.
Strong Customer Authentication
Strong customer authentication is a new safety feature for online purchases that are being implemented by many banks.
This feature is designed to protect you and your money by requiring you to authorize online purchases through your banking app or via a one-time 6-digit password that will be sent to you in a text message.
0% refers to a promotional interest rate companies use to entice consumers to get a credit card and is sometimes used sellers to entice the purchases of big-ticket, expensive items such as home appliances.
Chris Smith is a writer and blogger. Over his career, he has written for a number of publications, including The Guardian, The Telegraph, GoDaddy and The Huffington Post. He writes about sport and finance on his website Spend It Like Beckham.