A Guide to Money Jargon...

If you’re lucky, going to university will be the first time in your life that you’ve had to deal with your finances yourself. It will probably also be the first time you’ve needed to borrow large amounts of money, so reading the small print in all financial forms you sign is a must. But what good is reading the small print if you don’t know what it means? Use our money jargon guide to decipher some of the complicated language used in the banking world and make sure you don’t sign up to a lifetime of debt!

AER

AER stands for Annual Equivalent Rate. An AER figure is used to give you an idea of what the interest rate would be if interest was paid and calculated each year (rather than each month) and allows you to easily compare different rates.

APR

APR stands for the Annual Percentage Rate of charge. It’s a useful figure if you want to compare different credit and loan offers. All lenders should clearly tell you the APR for a loan or credit card before you sign an agreement- never ever sign up for anything without knowing this figure!

You may find that as a student with a low income (or no income) you are only accepted for credit with a high APR, such as SAV’s Aquacard. As frustrating as this is, high interest credit cards can be used to repair bad credit or to build credit and if you use them responsibly and pay the balance off in full every month you won’t be charged any interest!

BACS

BACS stands for ‘The Bankers Automated Clearing Service’, which is a service used to make direct credits and debits from your account. Payments using BACS will usually take three to four working days to credit the account to which the payment has been made.

Any wages you earn or online transfers from friends or family will probably show up on your bank statement as a BACS transfer- now you know why!

Balance transfer

A balance transfer is when you move an existing balance from one credit card to another. So, if you have a high APR credit card but find yourself being accepted for a lower APR card it might be worth considering transferring the balance.

Card Payment Protection cover

You’ll generally be offered Card Payment Protection Cover when you sign up for a credit card. It’s a kind-of insurance which could take care of your credit card payments if you are unable to work due to an accident, sickness or unemployment in the future.

Credit card

We’re pretty sure you know what one of these is... but remember, the shiny little plastic card that allows you to buy new clothes, gadgets or food (if you’re really desperate!) still requires you to pay for them at a later time, with added interest. Use wisely and for credit building purposes!

Credit rating

Credit rating is a system used by organisations that lend money, to help them judge if a person is worth giving credit to. Your credit rating will be determined by the number of points you get when your details are put through a Credit Reference Agency’s system. You’ll either be accepted or rejected, based on factors such as your income, whether you’re on the electoral role or not, and how you’ve handled credit in the past. It’s a highly computerised system and it will know if you’ve been unable to pay back credit in the past so be careful!

Credit Report

You can use a Credit Report to find out exactly what information companies see about you when you apply for credit. You might have to pay up to a fiver for it, but it’s a great way to see how you can improve your credit rating, which should mean you can borrow money at a lower rate in the future!

Credit Search

Every time you apply for credit, be it a loan, a credit card or finance on a car, a Credit Search is carried out. This is the lender searching for your name and address via a Credit Reference Agency. They do this so that they can find out about your credit history and whether you’re suitable to lend to. Every time a search is done, a record is put on your credit record.

Debit card

A bit like a credit card but without the scary interest (provided you don’t exceed your overdraft limit), a Debit Card lets you withdraw money from your account instantly at a cashpoint or pay for things in a store or online.

Guarantor

Your guarantor will most likely be your mum or dad, but can in fact be anyone who’s suitable and willing. Bravely, by becoming a guarantor that person commits to paying any debt that you fail to pay off yourself! You’ll probably be asked to supply the name of a guarantor the first time you rent a property by yourself in case you can’t pay rent every month.

Interest rate

Interest is the money you earn or pay for using money. So, if you borrow money you pay interest while if you have plenty saved up in the bank you earn interest. Shopping around for the best rates is always sensible- although remember that as a student low interest lending and high interest saving is probably not going to be available to you.

Overdraft

You’ll probably have been drawn to a student account with the promise of a big interest free overdraft! This means you can borrow money (up to an agreed limit) from your bank through your current account, without having to pay to do so, for a limited time (probably while you’re still studying). There are two different types of overdraft; Authorised Overdrafts are set up in advance and should only cost you the interest built up on the money you borrow, while Unauthorised Overdrafts (the ones that you get charged for) are unplanned and are usually the result of a bank paying for something that you don’t have the money in your account for. Avoid Unauthorised Overdrafts by always making sure there’s money in your account to cover your spending!

Overdraft extension

Your bank may be kind enough to let you increase your overdraft limit for a temporary or permanent length of time. Remember that you’ll still have to pay the money back though!

Standing order

You might have to set up a standing order to pay rent to your landlord, or regular money into a flatmate’s account. A standing order is basically you instructing you give to your bank to pay a certain amount to someone else regularly and for a set amount of time. The money will be taken from your account on an agreed date, usually every month.