Get your head around things like budgeting, bankruptcy and ISAs once and for all.
If keeping on top of your cash has you confused, you can make sense of it all with our vocab list below and our easy-to-understand Money Management guide.
Bankers’ Automated Clearing Services (BACS)
BACS stands for Bankers’ Automated Clearing Services. It’s a scheme which allows financial transactions to be done electronically and avoids the need for things to be done on paper. BACS transfers take three working days to be processed.
There is also the Faster Payments system, which was introduced in 2005 by the Payment Systems Task Force to reduce clearing times on the phone, internet and standing order payments. This service ensures that payments are cleared within two hours. Not all banks and building societies support this system so you will need to check with your provider if you want to use it.
Bankruptcy occurs when an individual or business has so much debt, they can’t afford to pay it off. When this occurs, either the creditor (the person or company owed money) or the debtor (the person in debt), obtains a court order to declare them bankrupt. A trustee is put in charge of the finances and assets, which the trustee will organise and sell to pay off the debts.
A budget is a list of how much money is coming in and what is being taken out (bills etc.). It also acts as a plan so you can see how much you can afford to spend. Think of a budget as similar to a diet but instead of counting calories, you’re counting how much money you spend.
Cash ISA (Individual Savings Account)
A cash ISA is a type of Individual Savings Account (ISA) which lets you deposit several thousand pounds’ worth of savings every financial year (April to March). It usually has a higher interest rate than a standard bank account and you don’t have to pay tax on the interest you earn like you would with other savings accounts. There are two kinds – a cash ISA and a stocks and shares ISA. Both come with limits on how much you can deposit in a single financial tax year (April to March).
Credit means you can get something now and pay for it later. If you get an item on credit, it means you have that item without the full amount having to come out of your account at once, allowing you to repay it at a later date. You might also find things like loans being referred to as credit as well.
A credit card allows you to borrow money or buy products and services without having the money there and then, up to the value of your credit limit. When you use a credit card, you will repay the money spent every month, including interest on top, unless you repay the full amount.
A debit card allows you to buy goods and services, like food shopping and getting your car fixed, with the money coming straight out of your bank account. Unlike a credit card, you don’t build up a balance that gains interest if you don’t pay it back straight away – you just pay the cost of the item or service.
ISA (Individual Savings Account)
See cash ISA above.
An overdraft allows you to take more money out of your bank account than you actually have in it. You’ll start using your overdraft if your balance has hit zero and you continue to withdraw money. It’s a bit like the bank giving you a small amount of credit, although this often means you’re hit with daily charges.
An overdraft can be agreed with your bank, in which case the interest you repay is also agreed prior to this occurring.
VAT (Value Added Tax)
VAT stands for Value Added Tax and refers to a national tax which is charged on most goods and services such as clothing, meals out and gadgets.
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