28 general banking terms explained
In this guide, we outline the most common terms you will encounter when handling your personal finances.
To ensure you are in full control of your finances and are choosing the right financial institutions to place your money in, you need to have a basic understanding of the most important banking jargon.
To help dispel any confusion that may surround these banking terms, we have defined them in a simple and clear manner.
1. A bank account
This is a place where you can deposit your money and withdraw funds from a financial institution, such as a bank or credit union. There are two different types of accounts; a current and a savings account.
2. A current account
This is used to manage your day-to-day banking transactions. With it, you can pay bills, withdraw money, receive your salary, and avail of an overdraft facility.
There are different types of current accounts available such as a regular account, a student account, a seniors account, and a graduate account.
All accounts will be subjected to different maintenance fees and charges on certain transactions.
You can discover the best type of current account for you here.
3. A savings account
This is a deposit account that is designed to hold money that you don’t need to spend straight away.
You may even be able to make a return on your savings, depending on the interest rate of your account.
You can choose from either a lump-sum or regular monthly saver account.
4. A joint account
This is a bank account shared between more than one person, such as a married couple. Each person has equal rights to the account and can deposit and withdraw money from it.
5. Debit card
This is a payment card that is linked to your current account. It allows you to access your money to pay for goods and services.
6. Credit card
7. Prepaid credit card
Also known as a top-up card, this allows you to load money onto the card from another account. You can only sPend the money that is loaded onto the card.
8. Personal loan
9. ATM - Automated teller machine
A machine that dispenses cash and performs other banking services. Once an account holder has inserted their card into the machine they can:
- check their account balance
- withdraw or deposit money
- print off a statement
Some banks will charge you a fee for withdrawing money from an ATM.
10. Account number
This is a unique 8-digit number that identifies your personal bank account. It is the last 8 digits of your IBAN.
11. Bank sort code
This 6-digit national sort code indicates where the branch of your lender is located.
12. IBAN - International Bank Account Number
This is a 22 character long code that acts as an international bank account identifier used to identify the account of a customer and the institution it is with.
The first two digits of an IBAN identify what country the account is from. In Ireland, all IBANs begin with IE.
Your IBAN can be found on your bank statement or online account.
13. BIC - Bank Identifier Code
Also known as a SWIFT code, a BIC is a unique address assigned to a bank so automated payments can be sent quickly and accurately to said bank.
BICs can be 8-11 characters long. When used in conjunction with an IBAN, it identifies the bank where the account holder’s account is based.
Your BIC can be found on your bank statement or online.
Simply put, credit is the ability to borrow money from a financial institution, with the understanding that you will pay the money back later.
15. Credit history
Your credit history is information about the loans you’ve taken out and your ability to repay them. Lenders check this to determine:
- whether or not to provide you with a loan
- the amount they’ll lend you
- the interest they will charge you on the loan
A strong credit history proves that you have a track record for paying your debts and bills on time.
16. Credit score
This score reflects your creditworthiness or in other words, your ability to meet your loan repayments.
If you have a bad credit score you may struggle to get a loan, a mortgage, a credit card, or an overdraft.
Having a good credit score means you will be granted a larger loan and be subjected to lower rates of interest on your loans.
17. Bank credit rating
A bank’s credit rating is a grade given to a bank to reflect its safety, soundness, and ability to meet long-term financial obligations.
These grades are issued by top rating agencies such as Moody’s, Fitch, and Standard and Poor.
18. Interest rate
This is the amount you are charged by a lender for borrowing money. It is shown as the percentage of the total amount of the loan.
The higher the interest rate, the more money you have to pay back on your loan. There are different interest rates available from lenders in Ireland such as variable and fixed interest rates.
19. Available balance
The amount of money in your account that you can withdraw immediately.
Funds added to your account.
21. Standing order
This is when you permit a set amount of money to leave your current account on a set date.
For instance, you could permit €100 to be put into your savings or for your rent to be paid each month.
22. Direct debit payment
This happens when you give another provider authorisation to take whatever money it needs from your current account depending on the balance you owe them.
It’s taken using your bank account number (BIC and IBAN) and may take several business days to clear.
Mortgage repayments and utility bills such as gas and electricity or phone bills are examples of direct debit payments.
23. Recurring payment
Different to a direct debit, this type of payment is charged to your current account using your debit card, instead of your IBAN. Recurring payments also offer immediate or next-day clearance.
Netflix, Amazon Prime, Spotify, and many gym memberships are examples of recurring payments.
This is a short-term loan that your bank gives you when you have no money left in your current account.
You will need to apply for this feature through your bank, which will then set a limit to the overdraft amount available to you and the time frame you have to repay it.
A person or business to whom money is paid or is about to be paid.
A person, institute, trustee or estate that will receive the money and/or benefits in an account if the account holder passes away.
This beneficiary will have been outlined in the deceased person’s will, insurance policy, retirement plan, annuity, trust or another contract.
27. A statement
This is an official document that summarises all financial transactions that occurred in your account during a set time, usually per month.
Statements can either be sent to you in either paper or electronic form, known as an eStatement.
28. A credit institution
Unlike a bank which is a privately owned or publicly traded for-profit institution, credit institutions are non-profit organisations, owned by their members.
The credit union is an example of a credit institution. Compared to a bank, with a credit union you will generally:
- Pay fewer fees
- Earn higher returns on your savings
- Get loans with lower interest rates
However, you will not be able to avail of an overdraft facility with a credit union.
Take control of your finances today!
On bonkers.ie, we offer a range of different comparison tools catered towards your banking needs.
Check out our other articles
If you found this guide useful, take a look at our other banking-related articles below:
- Read our step-by-step guide on how to switch current accounts here.
- Here are 8 things you should keep in mind when choosing your current account.
- Discover the right savings account for you on bonkers.ie in this guide.