This is a quick guide to the most common financial words, in alphabetical order. Underlined words are linked to other pages in this section, which give more detailed information on how these things work in practice.
ATM stands for Automated Teller Machine. These are also known as ‘cash machines’. You can find them in many places including banks, shopping centres and railway stations. In order to be able to use an ATM you need a cash withdrawal card and a personal identification number (PIN).
Balance Your balance is the amount of money you have in your account at any particular time or which you owe on your credit or store card. It will be shown on your statement.
Bank A commercial organisation that undertakes to provide a range of financial services, such as current and deposit accounts. Banks needed to be authorised to take your money. Find out more about different types of bank account here.
Budget A plan of your spending, and a record of your income and spending. You can find more about budgeting here.
Building society An organisation that is owned by its members, who are some or all of the customers saving with or borrowing from the society. They often offer a range of financial services and are similar to banks. Building societies must be authorised to take your money. Find out about different types of building society account here.
Cheque A written instruction to a bank. It can be used to pay you money. You can write out cheques to yourself to get money out of your account or to pay other people, if you have your own chequebook with your current account.
Credit card A plastic card which allows you to borrow money up to a certain limit. When you buy something with your credit card, the amount you spend is added to your total borrowing. Every month you are sent a statement to show how much you have borrowed and how much you need to repay. If you don’t repay the full amount, you will start paying interest. Only available if you’re 18 or over.
Current account A bank or building society account which helps you to manage your money, pay bills, receive money and keep money secure.
Debit card A plastic ard that takes money straight out of your bank account electronically. Having a debit card means you can pay for things in shops without using cash, and buy things on the internet or over the phone. Some debit cards can also be used in cash machines to get cash from your bank account.
Debt is money you owe to a person or organisation.
Direct debit An arrangement where you instruct the bank to release money from your account to pay bills and other amounts automatically. The billing company requests the money from the bank directly. You are told in advance in writing how much will be taken and the date it will be taken out of your account.
Fee A sum of money you pay, for example, to have a loan or credit arranged for you.
Income The money that you have coming in.
Interest The reward you get for lending your money to say, a bank or a building society. Also the cost you pay when you borrow money through a loan or credit agreement. It is usually worked out as a percentage of the money you have borrowed. For instance, if an interest rate is 10 per cent and you borrowed £100, the interest you have to pay will be 10 per cent of £100, or £10.
Interest rate The percentage that is paid on savings or loans. For example, a savings account offering an interest rate of 10% would give you a better return than one offering 5%. Similarly a loan with an interest rate of 20% will cost more than one with a rate of 15%.
Loan A sum of money which you borrow, usually with interest.
Overdraft If you spend more money than you have in your current account, you will go overdrawn. You can ask the bank if they can arrange to lend you some money for a short time. This is known as an arranged or authorised overdraft. You pay an agreed rate of interest on the overdraft. If you go overdrawn without asking the bank in advance, they might refuse to pay your cheques and charge you a high interest rate on the money that you owe them as well as a fee or penalty. This is called an unauthorised overdraft. Overdrafts are only available if you’re 18 or over.
Savings Any money you put aside for future use. This may be in a savings account or under your bed. ‘Rainy day’ savings are useful for emergencies and need to be easily accessible, while longer-term savings can be built up to give a ‘nest egg’.
Savings account – savings are often kept in bank, building society or National Savings accounts. The amount you put in does not fall in value but may grow as interest is added.
Standing order A method of paying regular amounts automatically. You instruct your bank to pay the money for you to a particular person or company. It’s your responsibility to change the payment if it needs to alter.
Store card Store cards are like credit cards, but are available from shops rather than banks. They can only be used to buy things at particular shops. Anything you spend on your store card is borrowed money. If you do not pay off the full amount each month, you will start paying interest on it.
Statement/bank statement A document from the bank or building society which shows all your recent payments into and withdrawals from your account. You should check it with your own records.
Withdraw take money out of your account.