Jim Henderson welcomes you to ~ N£$MA
Welcome to N£$MA - North East
Student Money Advisors. We are here to help all current and prospective
students with financial problems while at college or university.
We also give seminars to schools' senior
pupils on money management at university.
Do you want help with banking terminology?
- Here
are some tips
Links to other helpful sites:-
Student Awards Agency for Scotland (S.A.A.S.)
NAMSS – National Association for
Managers of Student Services
or
see us
at Aberdeen University web site
If you are interested in finding out more about us then please contact us by e-mail to obtain a copy of our brochure. Our e-mail address is:- nesma@globalnet.co.uk
Glossary of
Banking Terminology
For many of you some of the banking terms will be relatively unfamiliar. This is an attempt to dispel some of he mystique and to clarify some of the terms and how they might affect you.
ATM - Automated Telling Machine - usually situated in the external wall of a bank which allows 24 hour access to banking services particularly cash withdrawal. Most banks have reciprocal arrangements whereby cardholders from other banks can obtain basic services.
Bank Giro - a secure, prompt and inexpensive means of transferring money between banks and branches of the same bank provided you can supply the account name account number and sort code of the recipient.
Current Account - An account which gives you a cheque book and the possibility of an overdraft facility. This account often offers the opportunity to earn interest on credit balances.
Deposit Account - An account which does not supply a cheque book or an overdraft. Interest rates are often higher on such accounts especially if you can give the bank a reasonable period of notice before you withdraw funds e.g. a month
Credit Balance - Means you have money in the bank account.
Debit Balance - Means your bank account is overdrawn. You owe the bank!
Credit Card - A facility which allows you to purchase goods/services and pay for them at a later date. Failure to pay the balance in full at the first time of asking and within the credit period incurs high interest charges until you resume full payment within the credit period.
Debit Card - A facility often contained on your bank card which allows you to purchase goods without drawing a cheque or using cash. You sign a sales voucher and your card is "swiped" though an electronic terminal. The funds are deducted directly from your account only two or three days later.
Credit Period - The period between making the actual purchase and settling the bill with the credit card company. Maximum interest free period is usually 56 days assuming the purchase is made on the first day of the new charging period.
Charging Period (Credit Card ) - The period (usually 30 days ) over which transactions are accumulated prior to being detailed on a statement which is sent to you for payment. The charging period need not start at the beginning of a calendar month.
Charging Period ( Bank account) - discrete period during which transaction charges are
accumulated - usually 30 days but can vary. If your account is operated within
the terms of your agreement with the bank e.g.. you do not exceed your interest
free borrowing limit then charges will not be debited/deducted from your
account. Special conditions apply when you exceed this limit and often all
transactions which have taken place during the charging period have predefined
transaction charges applied to them. Thus if you inadvertently exceed your
overdraft limit on the last day of the period and you have say 30 transactions
already completed during that charging period the bank can make charges for all
those earlier items.
Transaction Charge - A charge for processing a
transaction e.g. paying a standing order or honouring a cheque drawn on your
account. The bank should provide you with a list of the detailed charges for
each type of transaction.
Overdraft Authorised - The level to which you may allow your account to fall into debit by agreement with the bank. Because of this the interest rate is usually comparatively modest but nevertheless still expensive. Interest is usually calculated on a daily basis and thus any deposits made reduce the cost.
Overdraft Unauthorised - Arises when you exceed your borrowing limit without the consent of the bank. A much higher rate of interest is charged - often at least double the rate charged on authorised overdrafts. In addition certain other costs may also be levied e.g.. if the borrowing is not approved then any cheques, standing orders or direct debits drawn or authorised by you, which would make the balance worse will not be honoured and significant additional charges may be levied on a per item basis. There is also usually a standard charge for issuing a letter to notify you that you have exceeded your approved limit- usually requesting that you contact the bank as soon as possible. Do not disregard these letters.
Cleared balance - When you write a cheque to a third party i.e. a shop, friend, landlord or deposit a cheque into your account it often takes several days for the Bank to process the transaction and for it to appear on your account. However the Bank knows about those transactions.Thus the bank will often have a different balance to you. This is known as the cleared balance and it is this balance on which the Bank makes its assessment of the position on your account particularly in respect of overdraft limits. It is thus essential that you remain aware of and take account of all cheques and deposits which you have processed before deciding to incur further expenditure.
Direct Debit - An authority given by you to a third party to debit your account on a specific dates or nearest banking day thereto. This authority can be for a set amount per month e.g. a loan repayment or it can be variable in that the amount may not be known at the outset e.g.. payment of a telephone bill where the amount is only known at the end of the billing period.
Standing Order - instruction given by you to your Bank to pay a set amount on predefined dates to a third party. The third party has no power to request payment from the bank. This is an alternative to direct debit but is often less favoured by companies because they do not initiate payment and are reliant on the account holder.
Bank Card - issued by the Bank - this card usually combines three
facilities
1)If the card number is written on the back of the
cheque this guarantees that the bank will honour the cheque provided it is for
an amount within the guarantee limit usually £50 or £100.
2) Most Bank cards act as debit cards (see debit cards.)
3) The cards can also be used to access the services provided by the ATM's. (see ATM ) . access is usually verified by the use of a PIN number.
PIN Number - your Personal Identification Number is a confidential number supplied to you by the Bank which will enable you to access a range of services including cash from the ATM.
IT IS ESSENTIAL THAT YOU DO NOT DISCLOSE THIS NUMBER TO ANYONE. Ideally it should be committed to memory but if retained the paper copy must be kept separate from your bank card so that in the event of theft of either your account cannot be accessed.
Phoneline - Telephone banking service which allows you access to bank staff at any time to arrange various transactions. The system is made secure by use of PIN numbers and passwords before access is granted. The calls are often free.
Sort code -
On your cheque you will see in the top right hand corner a six digit code
xx-yy-zz
This identifies your Bank and the particular branch
within the Bank.
Statement - At
least monthly you should receive a bank statement on which will be shown -
Withdrawals i.e. all the items which have
been debited to your account during the period. This includes cheques whose
numbers are usually shown: direct debits/standing orders for which brief
details of the third party receiving the payment are shown. Also shown are any
amounts for overdraft interest or transaction charges.
Pay ins - any
cheques or cash deposited by you or any funds sent by a third party e.g.. the
Student Loan Company as well as interest earned on credit balances.
Actual balances
- are shown usually at daily intervals. DR indicates that you are overdrawn.
It is essential that you check your statements to
ensure :-
a) that all the transactions do actually apply to you
- banks do make mistakes.
b) that all the transactions you are aware of have
been recorded and thus the balance is current. This is usually unlikely
as cheques written by you just before the end of the period will not
have been debited to your account due to the time it takes for them to
clear through the banking system. It is vital that you make allowance for them
when you are calculating how much you have left to spend. This process is
called bank reconciliation and involves adjusting the balance on your bank
statement to reflect these uncleared items.
This is usually quite straightforward i.e.
Balance per bank statement This can be positive
or (negative)
£/(£)
Deduct cheques already written but not yet shown on
bank
statement
( £)
Add any deposits you made before the end of the period
but which do not appear £
----------
Total equals funds available at the end of
previous
month
£/(£)
=======
APR - Used to
reveal the real cost of loans- takes account of the full amount of interest on
any money borrowed and the timing of repayments and all other possible charges.
It is used as a means of comparison between different lenders.
EAR (Effective Annual Interest Rate) - Used to reveal the real cost of overdrafts i.e. -
The real annual cost of interest is expressed as an
annual rate, taking account of the frequency when interest is charged but
excluding all other charges - which must be listed separately.
We acknowledge the assistance of the bank of
If you have difficulty in any of those areas contact either your own bank
or the Money Advice Centre at Aberdeen University, which is sited at the SRC
Building 50/52 College Bounds Old Aberdeen. tel 272969