| Understanding
Your Bank Account Details Better
With so many different terms floating
around, banking terminology can get really confusing.
If you are someone who doesn’t know their AER from their
APR and their PIN from their Chip, then this guide to
common banking terms could enlighten you.
AER
AER stands for Annual Earnings Rate. AER is used to calculate
the annual amount that you earn on an investment or savings
account. The higher the AER, then the better the investment
or savings account. If you are looking for a savings account
then compare AER’s to work out where your money is going
to make the most profit.
APR
APR stands for Annual Percentage Rate, and is the amount
of interest that you pay each year on a loan or mortgage.
The lower the APR then the less you will pay yearly on
that item of borrowing. Items with high APR’s like credit
cards have APR figures around 15-20% whereas mortgages
have a low APR figure of about 5-7%. The quickest way
to compare loans is to look at their APR values.
Chip and PIN
Chip and PIN is the current system used to pay for items
or withdraw cash using a credit or debit card. The card
has a 4-digit PIN, or personal identification number,
that you enter into a cash machine or till machine in
order to retrieve money or pay for goods. The chip on
the card holds information that, combined with the PIN,
allows the machine to identify you as the correct owner
of the card. Chip and PIN is more secure than the previous
magnetic strip and signature technology that was used
a few years ago. |
Overdraft
An overdraft is a sum of money that you are minus within
an account. If you go beyond the amount of actual money
you have in an account, then you go into the overdraft.
Many accounts have a pre-arranged limit that allows
you to go overdrawn, which can be useful, as unauthorised
overdrafts will cost you a lot in interest and fees.
Phishing
If you use online banking, then Phishing is a term you
might have heard of but you might not know what it means.
Phishing is a form of scam or illegal attempt to get
hold of your bank details online so that they can withdraw
money from them. When online banking started this was
a big problem, but with increased security measures
the problem is getting better. Most Internet browsers
include a Phishing filter to stop such practices from
occurring.
Standing orders
and Direct Debits
Standing orders and Direct Debits are similar in some
ways, but different in others. Both involve a regular
amount being transferred from one account to another.
Standing orders are a regular, fixed amount that you
pay to another person or company, usually monthly. Direct
Debits are an amount of money, which can be fixed or
varied, that is removed from your account at set intervals.
One example of a Direct Debit is mortgage repayments.
Getting advice
If you are unsure about any other banking terms, then
visiting your local bank branch or looking online might
help. Never be afraid to ask about something, because
if you don’t understand something that is part of your
account policy, you could lose money or not be taking
full advantages of the features on offer to you.
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