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Glossary of Banking Terms

Account Number
The unique number given to your account(s). You’ll find it on your bank statements and printed as the last group of computer-type figures at the bottom of your cheques. It is also on each page of your paying-in book.

Adverse selection
The tendency for higher-risk banks to opt for deposit insurance and lower-risk banks to opt-out of deposit insurance when membership in a deposit insurance system is voluntary.

Assets
These are things that people own such as buildings, vehicles, shares, and money in the bank. The opposite is liabilities.

ATM
Automated Teller Machine. (A cash machine.)

BACS Payment
Bankers Automated Clearing System - the system for sending money electronically between banks.

Balance
The amount of money in your account(s).

Banker's Draft
A cheque issued by a bank itself. People often use a banker's draft when making large purchases, like a car. Banks usually charge a fee for issuing drafts. The monies are guaranteed payment to the payee.

Bank giro Credit
The most common way to pay money into a bank account.

Banking Code
This is a voluntary code, which sets standards of good banking practice for banks and building societies with relation to personal and small business customers.

Bounced Cheque
A cheque that is returned unpaid.

CHAPS
Clearing House Automated Payments System: a computer system that allows electronic payments between banks on the same day.

Charge Card
A charge card allows its holder to pay for goods and services on credit. Unlike a credit card, the balance has to be paid off in full each month.

Cheque Guarantee Card
Guarantees that a cheque used with the card will be paid if the person receiving the cheque has kept to all the conditions.

Chip and Pin
A new way of paying for things with credit, debit and charge cards in the UK that’s designed to cut the cost of card fraud. New Chip and Pin enabled cards will have been issued since autumn 2003. When you use your new chip card to pay for goods at shops, restaurants, petrol stations etc, you’ll have to enter a four-digit personal identification number (PIN) into keypads at the checkout instead of signing to authorize the transaction.

Clearing
The process of presenting cheques to the drawer’s bank for payment. For example, if a friend writes you a cheque, you pay it into your account; your bank then sends it to your friend’s bank, which decides if it will honor it. It should do if your friend has enough money in the account. If the cheque is returned unpaid, you will be advised by post. The post takes several days, which is why payments into your account may take a while to show up on statements.

Current account
A bank account from which any amount of the balance may be withdrawn on demand, in the form of cheques, direct debits, standing orders, and via cash machines and debit cards.

Debit
A debit is a payment.

Debit card
For example, Maestro: a plastic card issued by a bank which allows a customer to buy goods and withdraw money at cash machines. The price of the goods is charged to the customer's bank account.

Deposit
Money put into an account, in the form of cash, cheque, or electronic transaction.

Direct debit
A payment out of a bank account, arranged by agreement with the account holder.

Electronic banking, or e-banking
Form of banking where an account is maintained via the internet rather than at a bank branch.

Financial Services Authority (FSA)
An independent non-governmental body, which regulates all areas of the financial services industry.

Gross
Before the deduction of tax. After tax is Net.

Interest
Money paid for the use of money, expressed as a percentage rate for the period of time in use, generally an annual rate. Interest is forbidden in Shariah law.

Internet banking
Internet banking lets customers conduct their banking online.

Investment
Something people put their money into in order to make money.

Joint Account
A bank account held in more than one name, usually by a married couple or partners living at the same address. Each party to the account is under obligation to repay any borrowing on it.

Liability
The sums people owe to other parties.

LINK
A network of ATMs, which allows people to use their cash card in other banks’ machines.

Liquid assets
Assets such as shares in a company or unit trust that can be sold quickly.

Liquidity
Refers to the ease with which people can get their money back from an investment.

Maestro
A Europay/MasterCard debit card network.

Moneygram
A simple method of transferring cash from one place to another without using a bank account.

Mortgage
A financing facility to buy a home. People put up their property as security against them paying back the loan. Various mortgage facilities are available that comply with Shariah.

Negative equity
The condition whereby the current market value of a house is worth less than the amount outstanding on a mortgage.

Net
After tax has been deducted. Before tax is Gross.

Offshore banking
Funds based outside the country of residence.

Overdraft
The customer takes out more money than they have in their bank. Overdrafts are not allowed by Shariah.

Payee
The person/business to whom a cheque is made out.

Personal finance
An amount of money people borrow from a bank, building society or some other lender, in return for making regular repayments, usually monthly. Shariah compliant personal financing are also available with Islamic banks.

PIN
Personal Identification Number. A secret number given to an account holder to be used when they put their card into an ATM.

Private banking
Supplement to the UCP for Electronic Presentation.

Re-mortgage
The replacement of an existing mortgage with a new one, usually to save money.

Share
An investment in, and part ownership of, a company, conferring the right to part of the company's profits (usually by payment of a dividend), and to any voting rights attached to that share, and which, in the case of public companies, can be traded on the open market.

Share dealing
The buying and selling of shares.

Sort code
Each bank branch is given an identification number, which is called a sort code. The sort code is used on cheques and other bank documents to identify the bank branch.

Stamp duty
The tax payable to the Government upon the transfer of ownership of a property or share.

Standing order
This is an instruction by a bank's customer to the bank, to pay an amount of money regularly to another bank account.

Statement
Detailed record of customer's account listing all transactions and service charges.

Stockmarket
The market for the sale and purchase of shares, government bonds, and other securities.

Telephone banking
The facility to phone a bank to access your account details and carry out any banking business over the phone.

Withdrawal
The term for taking money out of your account. You are making a withdrawal when you use a cash machine to get, say, £50 out of your account.

Yield
The income from an investment.

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