unit 1.6 - borrowing money

Question 1

APR

Answer 1

Annual percentage rate - total cost of borrowing over one year, including interest charger and any fees

Question 2

ATM

Answer 2

Automated teller machine , cash machine

Question 3

bank rate

Answer 3

interest rate that Bank of England uses when it lends money to other banks.

Question 4

basic bank account

Answer 4

current account that allows people to store money as an electronic balance and make payments. NO debit card , cheque book or overdraft facility on this type of account.

Question 5

balance transfer

Answer 5

moving the balance (total amount owed) on a card from one card provider to another

Question 6

Card verification value (CVV)

Answer 6

three numbers on the back of the card, These are a security measure designed to prevent fraudulent use of the card by someone else.

Question 7

cashback card

Answer 7

type of card that gives back to the card holder a percentage of the value of transactions made with the card, in the form of cash

Question 8

charge card

Answer 8

credit card that must be paid back in full every month

Question 9

cheque

Answer 9

a written instruction to the provider to oat a specified amount to a specified person or organisation

Question 10

consumer credit

Answer 10

this is another term for borrowing, “taking credit” or “buying credit” refers to borrowing.

Question 11

cost of borrowing

Answer 11

also called ‘cost of credit’. This is the total amount that the borrower will be charged including interest and any additional fees. For personal loans and credit card borrowing, the cost over a 12 month period must be quoted -APR

Question 12

credit agreement

Answer 12

formal agreement between the provider and a borrower setting out the amount borrowed, interest charged, the arrangements for repayment and any other terms and conditions.

Question 13

Credit card

Answer 13

card that allows holder to make purchases. Transactions are paid by the card provider, card holder repays the amount owed to the provider either in one payment or instalments. Provider charges interest on cash withdrawals from when it happened and on purchases after a certain period.

Question 14

credit history

Answer 14

record of money borrowed and repaid by an individual. These records are held by credit reference agencies and providers will check the individuals credit history when a customer applies for a borrowing product.

Question 15

credit union

Answer 15

mutual organisation (that’s owned by members) that provides a range of financial products to members. members of a credit union must share a common bond, (e.g. work in the same area)

Question 16

current account

Answer 16

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

Question 17

debit card

Answer 17

card that can be used to withdraw cash, to make face-to-face payments online or over the phone.

Question 18

direct debit

Answer 18

electronic payment out of an account.

Question 19

EAR

Answer 19

equivalent annual rate - cost of borrowing using an overdraft

Question 20

interest

Answer 20

money 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 type of account or sometimes on credit history.

Question 20

interest

Answer 20

money 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 type of account or sometimes on credit history.

Question 21

interest rate

Answer 21

the amount that a financial services provider pays to a saver or charges a borrower when it lends money. Expressed as a percentage.

Question 22

mortgage

Answer 22

a loan taken out to pay for a property, usually over a long term such as 25 years.

Question 23

overdraft

Answer 23

facility that allows an account holder to withdraw more money than what they have in their account.

Question 24

payday loan

Answer 24

loan designed to be taken out for very short period, which charges a very high APR.

Question 25

payment allocation

Answer 25

order in which a card provider uses money paid into an account to pay off the amount outstanding

Question 26

standing order

Answer 26

electronic payment out of an account. Standing orders are uses to make regular payments of the same amount.

Question 27

store card

Answer 27

card issued by a retailer that the holder can use to make purchases within that store. Like a credit card, the amount owing is paid off at a later date, and interest is paid on amount owed.