Quick glossary to savings

Even your rainy day saving may involve some unfamiliar words and phrases.  Here's a quick guide to some of the most common ones to help you.

AER

Stands for annual equivalent rate. This is the rate that is generally quoted as interest paid on savings and investments so that you can compare accounts. It is used to demonstrate what your interest return would be if the interest was compounded  (adding interest on to the balance then paying interest on the new higher balance) and paid annually instead of monthly (or any other period).

ATM

Are 'Automated Teller Machines' which are often referred to as cash machines. You can access your money from an ATM at any time of the day. They also provide you with other basic services, such as balance enquiries.

Balance

This relates to the amount of money in your bank account.

Cheque

A cheque instructs your bank to pay a specific amount of money from your account to another person or organisation. You can also deposit cheques from other people into your account.

Credit

A payment into your account.

Debit

A payment taken from your account.

Deposit

Money you put into your account.

Direct debit

This is an instruction from you to your bank or building society allowing someone to take money from your account. The amount of money taken can vary, but you must be told the amounts and dates beforehand. You can utilise Direct Debits to pay bills automatically from your account on a regular basis.

Fixed Rate

This is a form of savings account which will (in most cases) not allow you to access your money until the agreed term has finished.  The reward for this tends to be a higher rate of interest, which means you generally get more savings back.

Gross

The way interest is paid before any deductions e.g. tax/fees.

Interest rates

Are important because they effect how much it costs you to borrow money and how much you earn on any savings you may have.  Borrowing becomes cheaper when the rate goes down and dearer when the rates go up.  Savings earn less when the rate goes down and more when the rate goes up.

Interest rate

The percentage rate that is paid on every £1 saved or borrowed with the bank.

Individual Savings Account (ISA)

Allows you to save money up to £3,600 in a cash deposit ISA without having to pay any further tax on your returns.  UK residents over the age of 18 each have an an allowance of £7,200 each year to save within ISAs.

Instant access

This is a form of savings account which enables you to have access to your money without delay.

Net

The amount of interest paid after deduction of income tax (or other fees).

A Payee

When a cheque is made out, the person or organisation that it is made out to is the payee.

PIN

PIN stands for Personal Identification Number and it is the four digit security number you will use when you are taking out money at an ATM or making transactions using your debit card.

Sort code

This is a six-digit number that forms part of your account details and identifies a specific branch of the bank.

Standing Order

A standing order can be set up if you want to transfer a specific sum on a regular basis to another account. This can be used to make regular savings from a current account to a savings account.