Topic 4: Everyday banking

Question 1

AER

Answer 1

Annual equivalent rate - the interest that’ll be earned on money in one year and takes into account how often the provider pays interest (monthly or annually)

Question 2

ATM

Answer 2

Automatic teller machine, known as a cash machine

Question 3

Basic bank account

Answer 3

Current accounts that allow people to store their money as an electronic balance and make payments by direct debit, standing order, pre-paid cash card or withdrawing cash. There’s no debit card, cheque book or overdraft facility

Question 4

Budget Surplus

Answer 4

Sum of money available once all the essential expenditure has been made.

Question 5

Cash Card

Answer 5

Cards used to withdraw cash from ATMs or branch counters.

Question 6

Cheque

Answer 6

A written instruction to the provider to pay a specified amount to a specified person or organisation.

Question 7

Current account

Answer 7

Bank or building society account where people store money in the form of electronic balance and withdraw it to make payments.

Question 8

Debit card

Answer 8

A card that can be used to withdraw cash, to make face-to-face transactions in shops, online or over the phone.

Question 9

Direct credit

Answer 9

Electronic payments into an account. E.g., a salary or benefit payments.

Question 10

Direct debit

Answer 10

Eectronic payments out of an account. The amount and frequency can vary

Question 11

HMRC

Answer 11

Her Majesty’s Revenue and Customs – collects taxes on behalf of the government.

Question 12

Interest

Answer 12

Money either paid to an account holder by the provider, or charged to the account holder by the provider. Is paid on savings accounts and some current accounts and charged on borrowing (E.g., an overdraft). Providers decide the rate of interest it’ll pay or charge, depending on the type of account or the credit history of person.

Question 12

Money laundering

Answer 12

Process of making ‘dirty’ money (gained from criminal activities) ‘clean’ (making it look real)

Question 13

Office of Fair Trading

Answer 13

Government department that monitored how businesses compete with each other. Abolished in April 2014 and its responsibilities shared between the FCA and CMA

Question 14

Overdraft

Answer 14

Allows an account holder to withdraw more money than they have in their account.

Question 15

Packaged account

Answer 15

A current account that offers extra benefits, e.g., travel insurance, the account holder pays a monthly fee.

Question 16

Premier account

Answer 16

A current account that offers additional benefits for wealthy customers with an income or savings above a certain level. E.g., a personal banker.

Question 17

Prepaid cards

Answer 17

Cards that have to have money credited to it before the card holder can use it to pay for goods. Once the initial sum runs out, it can be topped up. Some cards can be loaded with foreign currency and used abroad.

Question 18

Standing order

Answer 18

Electronic payments out of an account. Are used to make regular payments of the same amount.

Question 19

Statement

Answer 19

Record of the transactions on an account, issued at regular intervals (monthly or quarterly). It indicates
whether a debit or credit to the account was made by cheque, withdrawal from an ATM, direct debit, etc.

Question 20

Student account

Answer 20

A current account designed for students in higher education that charges low interest or no interest on overdrafts, and offers other benefits such as low-cost contents or travel insurance.

Question 21

Transaction

Answer 21

Buying or selling something.

Question 22

Youth account

Answer 22

A current account designed for people under 18; no overdraft facility is provided as banks don’t usually allow under-18s to borrow