Business Unit 3 Revision - Personal Finance Terms

• Cash


  Notes and coins in a wide range of denominations.
• Debit card


  Issued by banks with payments for goods and services being deducted directly from a current account.
• Credit card


  Issued by financial institutions allowing customers to delay payments for goods and services.
• Cheque


  A written order to a bank to make a specific payment for a specific amount of money from one person’s account to another account.
• Electronic transfer


  Payment is transferred directly from one bank account to another.
• Direct debit


  An agreement made with a bank allowing a third party to withdraw money from an account on a set day to pay for goods or services received e.g. electricity bill.
• Standing order


  An agreement made with a bank to transfer a fixed sum of money to a third-party account on a set date on a regular basis e.g. a fixed loan repayment.
• Pre-paid card


  Money is uploaded onto a card with transactions then withdrawn to reduce the balance.
• Contactless card

  Cards with an embedded chip and antenna that enable consumers to wave their card over a reader at the point of sale for an automatic transaction.
• Charge card

  Issued by financial institutions allowing customers to delay payments for goods and services for a short period of time with the balance being paid off in full at each statement date.
• Store card


  Issued by a retail outlet to allow customers to delay payments for goods and services – similar to a credit card but only for the store(s) specified.
• Mobile banking 


  The ability to carry out financial transactions using mobile devices such as phones or tablets.
• Bankers Automated Clearing Service (BACS) Faster Payment


  A system that allows the transfer of payments directly from one bank account to another in 3 working days (unless faster payment is available).
• Clearing House Automated Payment Systems (CHAPS)


  A system that allows the transfer of payments directly from one bank account to another, usually on the same day.
• Standard 


  This type of account provides full day-to-day banking facilities e.g. cheque book, debit card, easy access to your money and an authorised overdraft facility.
• Packaged, premium


  This type of account usually has an annual fee or additional charge in return for offering extra incentives. These benefits can vary but may include offers such as discounted home insurance, no fee overdraft, and premium access to popular event tickets.
• Basic


  This account offers limited features and would be typically held by a person with no credit history in the UK or a poor credit history
• Student


  These are designed to assist young people and students to become prudent with their personal finances. They may come with bonus features, such as interest free overdraft facilities.
• Overdraft


  Allows an individual to withdraw money from a current account that they do not actually have.
• Personal loan


  Allows an individual to borrow a set amount of money which is to be repaid in regular instalments, with interest.
• Hire Purchase


  Allows an individual to have use of an item immediately but pay for it in regular instalments. The property is only owned by the individual when the final instalment has been paid.
• Mortgage


  A long-term loan to fund the purchase of assets e.g. property which will be repaid over a long period e.g. 25 years.in time and receiving a wage
• Credit cards


  Allows an individual to pay for goods or services using a card with a statement issued at the end of each month. The balance can be paid in full without incurring interest, or in smaller amounts with an interest charge.
• Payday loan


  A short-term source of finance that can help to bridge the gap between the present moment in time and receiving a wage.
• Individual Savings account (ISA)


  A tax-free way to save or invest.
• Deposit and savings accounts


  An account where interest is paid on the balance.
• Premium bonds


  A government scheme that allows individuals to save, up to a set amount, in bonds. No interest is earned but the bond is placed into a regular draw for cash prizes.
• Bonds and gilts


  These are fixed term securities where the individual lends money to companies and governments in return for interest payments.
• Shares

  Investments in business in return for equity. The shareholder becomes a part-owner of the business.
• Pensions


  Long-term savings plans where individuals make regular contributions through their working life. This is then repaid upon retirement, either as a lump sum or regular payments.
• Car


  To cover both theft and accidents – there is a legal requirement to insure any car that is on the road and this protects the driver, passengers and other road users.
• Home and contents 


  Home – covers the physical building against events like a fire or flood damage. Contents – covers the physical items inside the house and when they are used away from home.
• Life assurance and insurance

  Life assurance – an ongoing policy to pay a lump sum upon death. Life insurance – a policy for a set period of time (e.g. mortgage term) to pay a lump sum if you die within that period.
• Travel


  Protects individuals or groups while abroad. Cover usually includes illness, loss or theft of property, cancellation and emergencies up to predetermined limits.
• Pet


  Protects the owners of pets against some or all of the expenses associated with treating an injured or sick animal e.g. vet fees.
• Health

  Covers individuals, families or employees against medical expenses including assessments, treatments and loss of earnings. In the UK, this can pay for private treatment or payment plans for routine visits e.g. to the dentist.
• Bank of England


  The UK’s central bank with responsibility for maintaining a healthy level of financial stability for the UK as a whole.
• Banks


  An organisation that handles financial transactions and stores money on behalf of its customers.
• Building societies

  Organisations that handle financial transactions and store money on behalf of their members. Members (account holders) are part-owners of the building society and have a right to vote and receive information on the running of the society.
• Credit unions 


  Not-for-profit organisations that handle financial transactions and store money on behalf of their members.