Glossary

A | B | C | D | E | F | G | H | I | J | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z


Account Balance The exact amount of money in an account.
Account fee A regular amount charged by the bank or other financial provider to an account, often monthly.
Accounting A system of recording monetary transactions also called bookkeeping
Annual fee A fee often charged by credit card companies annually.
Annual percentage rate (APR) The actual yearly cost of a loan, including interest and charges.
Annual percentage yield (APY) The return on an investment, over one year.
Appreciation Increase in the value of an asset.
Assets Things of value owned by a person or a company or business.
Automated Teller Machine (ATM) Automated facility for customers to withdraw money and do certain other transactions. Often called hole in the wall or cashpoint.
Bad credit A situation in which lenders believe that, due to a borrower's bad history, further loans to this person would be especially risky.
Bank A financial institution handling money for its customers.
Bank account A service provided by a bank, allowing customers to handle and track their money. Services include current accounts, savings accounts, credit cards, loans and mortgages.
Bank statement A document sent to customers by the bank, detailing the transactions on an account usually sent monthly.
Bankruptcy A process of legally declaring inability to repay debts, and providing protection for the debtor. Bankruptcy orders are kept on record for six years from the date of the bankruptcy.
Bond An investment in the government or a company essentially a loan, with a fixed or variable rate of interest. Usually has a fixed term.
Bookkeeping See accounting.
Borrower A person or business that borrows money from a lender.
Bouncing a cheque The process by which a bank refuses to pay a cheque drawn on a customer's account usually because the account does not contain enough money.
Break-even The point at which income equals expenses.
Budget A financial plan drawn up can be for an individual, a family, a business, or a government. Usually for a period of a month, or a year, but can be for longer periods.
Building Society A financial institution offering many of the services offered by banks. Building societies are usually owned by members.
Capacity A borrower's ability to make monthly repayments on a loan or other commitment.
Capital The total of a person's or a business's assets less their liabilities.
Capital gain Profit made on an asset the difference between the proceeds of sale and the cost of buying the asset.
Capital Gains Tax A tax on capital gains.
Capital loss Loss made on selling an asset when the cost of buying the asset is more than the proceeds of sale.
Cash flow A measure of the movement of cash in and out of the funds of a company or an individual.
Certified cheque A cheque written on a bank account, which is guaranteed by the bank, on which it is drawn.
Character A judgement made by a lender about the financial steadiness of a borrower including things like length of time at current address, or in present employment.
Charge card Similar to a credit card, but the holder is required to pay off the balance in full every month.
Cheque A written order instructing a bank to pay a specific amount to a specific person. A cheque must be dated and signed.
Cheque guarantee card A card issued by a bank, guaranteeing payment up to a specified limit.
Cleared funds When you pay an amount into your bank, it is only cleared when it has gone through the system and has been paid by the payer's bank.
Clearing The time it takes for money to be processed as it moves between bank accounts.
Collateral Assets of a borrower that a lender has a right to take possession of if the borrower defaults on payment.
Collection agency A business specialising in collecting outstanding debts.
Commission A form of payment for a service which is related to the principal amount of a transaction. For example, estate agents charge a commission of a percentage of the sale price of a house. Stock brokers charge a commission of a percentage of the value of the trade carried out.
Completion The day and time when all the necessary legal formalities are signed for the transfer of a house or piece of land.
Compound interest Interest paid or received not only on the original amount of the loan or investment, but also on the accumulated interest.
Consumer An individual buying products or services for personal or household use.
Corporation tax A tax on the profits of companies.
Cost of loan The total cost of servicing a loan including interest plus all charges, fees, etc.
Council tax A local tax based on the value of a property.
County Court Judgment (CCJ) Record of a court order to repay money. CCJ's stay on the record for six full years from the date of the judgment.
Credit The process of allowing a customer to purchase goods or services on the promise of future payment.
Credit card A card used to borrow money or to pay for purchases. The card allows the cardholder revolving credit that can be paid monthly from the minimum amount up to the full amount.
Credit history A record of a person's use of credit.
Credit limit The maximum amount allowed to be used on a credit card.
Credit rating An evaluation of an individual's or a business's financial history and ability to pay debts.
Credit reference agency An organisation that collects information on people's credit history for use by lenders.
Credit union A not-for-profit organisation owned by its members providing saving and loan facilities for its members.
Creditor A person or business to whom money is owed.
Creditworthiness A lender's evaluation of a borrower's ability to pay debts.
Currency Any form of money in public circulation, and universally accepted.
Current account A bank account allowing a customer to deposit money and withdraw money, by writing cheques, standing orders or direct debits.
Database A collection of information organised for ease and speed of access and reference usually kept on a computer.
Debit Any transaction that reduces the balance in a bank account.
Debit card A card issued by a bank. Used in a similar way to a credit card, but the amount is debited immediately from the bank account.
Debt Money owed to another person or business.
Debt counsellor A professional adviser helping people with debt problems can be on a paid or voluntary basis.
Deed A legal document conveying ownership of property.
Default Failure to pay a debt.
Delinquency Regular late payments by a debtor on monthly payments, or on trading accounts.
Deposit Putting money into a bank account in the form of cash or cheques or as a direct deposit, such as from an employer.
Deposit slip A bank form to enable deposits to be credited to the correct bank account.
Direct debit A form of payment, authorised by signature of a bank account holder, authorising a creditor to withdraw sums from the holder's bank account.
Diversification An investment strategy designed to reduce risk by combining a variety of investments. Not putting all your eggs in one basket.
Dividend Reward for investors in a company — a share in the profits.
Down payment First sum of money paid to a seller or hire purchase company. Also called a deposit.
Economy Financial activities related to the production of goods and services of a particular region or country.
Equity The financial difference between the market value of an asset and the amount of loan or mortgage still outstanding on it. Usually applied to home ownership.
Equity release Method of allowing you to realise some of the value in your home by a long term loan. Usually only available to older people.
Fees Charges made by a financial institution for their services.
Financial institution Any business providing financial services to the public including banks, building societies, credit unions, money lenders, insurance companies, pension companies, etc.
Financial planning The process of setting financial goals, and producing plans (e.g. budgets) to achieve those goals.
Fixed costs Costs which do not vary, such as monthly payments on a hire purchase agreement.
Fixed rate mortgage A mortgage with a fixed rate of interest.
Foreclosure The legal process by which a lender enforces their right to possess a property and sell it to pay off their debt.
Garnishee order A legal court order requiring payment of a debt by instalments from a person's earnings.
Grace period A period of time in which a lender does not charge interest.
Gross income The full amount of money earned i.e. before any deductions.
Guarantor An individual or company who guarantees payment of a debt due by another person.
Hire purchase A form of credit involving a down payment followed by regular monthly payments. During the credit period, the goods involved are the property of the credit company, and the user is hiring them from that company.
Identity theft Criminal activity involving stealing personal information allowing the thief to obtain goods or credit falsely.
Income Amount of money received or earned over a period of time.
Income Tax A tax on personal income.
Individual Savings Account A form of saving and investing with tax advantages.[ISA]
Inheritance Tax A tax charged upon the value of a person’s estate at the time of their death
Instalment credit A loan repaid in regular instalments over a period of time.
Insurance Business contract (known as a policy) by which the insurer promises to pay certain amounts in the event of certain contingencies happening. The cost of this is called the premium.
Interest Financial reward for the use of money. Usually expressed as a percentage of the amount of money involved (the principal).
Interest rate The amount of interest paid or charged in percentage form.
Investing Purchasing something usually part ownership of a business or property for the expectation of future reward or gain.
Investment trust A form of collective investment. Many small investors entrust their money to the managers who invest in a range of companies.
Joint account A bank account held in the name of more than one person.
Late fee Fee charged on things like credit cards or other credit agreements for payments made after the due date.
Lender A person or institution that lends money to a borrower.
Liability A debt owed by one person or business to another.
Lien The legal right of a creditor to obtain money owed by forcing sale of property that has been pledged.
Life assurance Insurance policy to give a cash sum to your dependants when you die.
Loan An agreement between a lender and a borrower by which the borrower agrees to repayment of money borrowed over a period of time. The repayment can be with or without interest.
Long term loan A loan requiring repayment over a period longer than a short term loan, usually over five years or more.
Matching contributions Arrangement whereby an employer contributes equivalent amounts to the employee to a savings or retirement plan.
Marketing The activities of a business designed to gain new customers and sell more goods or services.
Minimum balance A specified amount of money required by a financial institution to maintain an account.
Minimum payment The minimum amount specified on a credit card statement to pay from the balance shown to be due, in order to keep the account in good standing.
Mortgage A loan to finance the purchase of a house, with that house given as security for the loan.
Mortgage indemnity policy An insurance policy guaranteeing repayment of a mortgage if the borrower defaults.
National Savings A government organisation giving a range of savings products - accounts, bonds, etc.
Net income The amount of income for a certain period after all deductions (e.g. tax and National Insurance). Also called "take-home" pay.
Online banking A service enabling you to operate a bank account over the Internet.
Outstanding balance The amount of a debt still owing.
Overdraft An arrangement whereby the bank allows a customer to withdraw more funds from a current account than have been deposited. It is a form of lending.
Pawnbroker A money lender taking goods as pledges against the repayment.
Pay period The period of time used to calculate wages (usually weekly or monthly).
Payee The person or business to whom a payment is made.
Payer The person or business who pays money.
Payroll deductions Deductions made at source i.e. before wages are paid to the employee. Includes items like tax, National Insurance, student loan repayments and pension contributions.
Pension An income paid to someone who has retired from work.
Personal Identification Number (PIN) A secret combination of numbers used to gain access to information or money.
Personal guarantee A legally binding promise to make good a debt if the borrower defaults.
Portfolio A collection of investments owned by the same person.
Predatory lending Lending money in a way that is unscrupulous, illegal, or not in the best interests of borrowers.
Premium The annual costs of renewing an insurance policy.
Principal The amount of money borrowed, loaned or invested, on which interest is charged.
Profit The gain of a business or an investment after all expenses have been met.
Profit sharing An arrangement by which an employer shares some of the profits with its employees.
Prospectus A document offering shares for sale in a company.
Reconciliation The process by which you match up the balance in your account with the balance shown on the bank statement.
Refinancing The process of paying off one loan or mortgage to replace it with another.
Repossession The legal process of a secured lender taking possession of a property which has been pledged for a loan, or a hire purchase company taking possession of the goods.
Retailing Selling directly to the end consumer.
Revolving credit Credit allowing the borrower to take credit up to a certain amount, make regular repayments, and keep borrowing up to the credit limit.
Risk The likelihood of loss.
Savings account A bank account giving interest, not designed for day to day transactions.
Secured credit A loan backed up by collateral property or guarantee of any sort.
Self assessment A means of administering and collecting income tax. Usually used for self-employed workers, those with higher incomes and those with complicated financial affairs.
Short term loan A loan for a limited period usually up to five years.
Sort code A six digit number printed on your cheques which identifies your bank and the branch.
Student Loans A special form of loans for university students, overseen by the government through the Student Loan Company.
Take home pay See net income.
Telephone banking Arrangement whereby you can carry out transactions on your bank account over the telephone.
Term The period over which a loan is scheduled to be repaid, or over which an investment runs.
Transaction Any agreement between two people or businesses to deliver goods or services in exchange for payment.
Unit trust A form of collective investment. Many small investors entrust their money to the managers who invest in a range of companies.
Unpaid balance The amount still owing on an account.
Unsecured credit A loan not backed up by collateral or a guarantee of any sort.
Utilities Services such as gas, electricity, telephone.
Valuation The formal process of valuing a property or house by a qualified valuer. Used for establishing how much may be borrowed on that property.
Value Added Tax (VAT) A tax added to sale prices of goods or services.
Wholesale Selling or buying goods in quantity.
Will Legal document stating how you want your assets to be dealt with on your death.
Withdrawal The process of taking money out of your bank account.