Getting to grips with financial jargon
A recent poll showed British adults can identify more text speak than financial terms. If you don’t know the difference between AER and APR, let me guide you through the mysterious world of banking jargon. Prepare to be de-baffled, my friend.
What is an APR we hear you ask?
Well it stands for Annual Percentage Rate. Basically, this is the cost of credit (including charges), the amount of interest you will pay and when you have to pay it back. You can use this figure to find the best loan for you – for example, a loan with 15% APR is more expensive than one with 10%.
This is the least understood financial term in the UK. AER stands for Annual Equivalent Rate and can be used to help you compare savings accounts. It gets complicated my friends, but put simply it shows you how much you get over a year if you put money in an account and don’t touch it.
This is how much you owe from missing payments, e.g. rent, tax or elephant support payments. If you have ‘money in arrears’ it’s not a good thing.
Balance can mean the amount of money you have in your account but it can also mean how much you owe on a credit card or loan. It’s the yin and yang of cash, basically.
Credit could mean that a bank or lender has loaned you money to buy something. Credit can also mean that you have money in your account available to spend.
Your credit score is how creditworthy you are. It’s a number that lenders use to assess how likely you are to pay back any credit or loans they accept you for. Applying for too many credit cards can affect your credit score, so take it easy on that front. If you have a poor credit score, you might struggle to secure the best deals, but don’t give up hope. Use www.moneyguru.com – seek and you shall find.
A balance transfer is when you move your single or multiple existing debts onto a new card in order to benefit from lower interest rates. This can help you clear your debts, but make sure you pay it back by the end of the introductory offer and be aware of any fees that may apply or you could end up paying big spondoolies. Be aware a balance transfer fee may apply, typically you will be charged a percentage of the overall balance you wish to transfer.
An ISA is a joyous thing indeed. It stands for Individual Savings Account. An ISA allows you to save money without paying tax on the interest.
An Automated Teller Machine – the hole in the wall that dishes out cash. Use your debit card to withdraw money rather than your credit card otherwise you may be charged. This will also be recorded on your credit file.
Usually, you’ll be able to use your credit card overseas in exactly the same way as you would at home, but you’ll probably be charged a ‘Foreign Transaction Fee’ (FTF). This is a percentage of the overall cost. For example, if a cocktail costs £10 and the FTF is 3% - you’ll pay £10.30. You can get specific cards that offer 0% on overseas transactions, which are a good idea if you’re thinking of fleeing the country soon, or you know, going travelling.
A little less bamboozled now? Feel free to roam around my wisdom section for more money need-to-knows.
Peace and loans,
Written by Robert Bester
Published on 22nd December 2016