topic 6 Flashcards
APR
Annual percentage rate – the total cost of borrowing over one year
ATM
automated teller machine
bank rate
The interest rate that the Bank of England uses when it lends money to other banks. Financial services providers take account of the Bank rate when they decide how to set interest rates on their own products.
basic bank account
a current account that allows people to store their money as an electronic balance and make payments by direct debit, standing order, prepaid cash card or by withdrawing cash. There is no debit card, cheque book or overdraft facility on this type of account
balance transfer
Moving the balance on a card from one card provider to another
CVV
Card verification value - Three numbers on the back of a credit or debit card. This is a security measure designed to prevent fraudulent use of the card by someone other than the cardholder
cashback card
A type of card that gives back to the cardholder a percentage of the value of transactions made with the card, in the form of cash.
charge card
A credit card that must be repaid in full every month
cheque
a written instruction to the provider to pay a specified amount to a specified person or organisation
consumer credit
This is another term used for borrowing
cost of borrowing
Also called ‘cost of credit’. The total amount that the borrower will be charged including interest and any fees. For personal loans and credit card borrowing the cost over a 12- month period must be quoted
credit agreement
The formal agreement between a provider and a borrower setting out the amount borrowed, the interest charged, the arrangements for repayment and any other terms and conditions.
credit card
A card that allows the holder to make purchases face to face, online or over the phone, and to withdraw cash from an ATM. Unlike a debit card, where the money is taken from the holder’s own account, transactions are paid by the card provider. The card holder repays the amount owed to the provider either in one payment or in instalments. The provider charges interest on cash withdrawals from the time the withdrawal is made and on purchases after a certain period.
credit history
A record of money borrowed and repaid by an individual. These records are held by credit reference agencies and providers will check the individual’s credit history when a prospective customer applies for a borrowing product.
credit union
A mutual organisation that provides a range of financial products to members. Members of a credit union must share a common bond
current account
a bank or building society account where people can store their money in the form of an electronic balance and withdraw it to make payments
debit card
a card that can be used to withdraw cash, to make face-to-face transactions in, and to make payments online or over the phone
direct credit
an electronic payment into an account
direct debit
an electronic payment out of an account
EAR
Equivalent annual rate – the cost of borrowing using an overdraft.
interest
money either paid to an account holder by the provider or charged to the account holder by the provider. Interest is paid on savings accounts and some current accounts and charged on borrowing. Each provider decides the rate of interest it will pay or charge, depending on the type of account and, in some cases, the credit history of the individual account holder
interest rate
The amount, expressed as percentage, that a financial services provider charges a borrower when it lends money, or pays to a saver.
mortgage
a loan taken out to pay for a property
overdraft
a facility that allows an account holder to withdraw more money than they actually have in their account
payday loan
A loan designed to be taken out for only a very short period, which charges a very high APR.
payment allocation
The order in which a card provider uses money paid into an account to pay off the amount outstanding
personal loan
A product that allows someone to borrow a fixed amount over a fixed period at a fixed rate of interest
standing order
an electronic payment out of an account used to make regular payments of the same amount
store card
A card issued by a retailer that the holder can use to make purchases within that store or group of stores. As with a credit card, the amount owed is paid off at a later date, either in one payment or in instalments, and interest is charged on the amount owed.
