Understanding common banking terms

As you become more financially independent, you may come across some new banking and borrowing terms that are unfamiliar to you.

Glossary of common banking terms

Having a greater understanding of common banking terms may help you:

Interpret your bank statement and feel comfortable making every day financial decisions
Make it easier to compare savings, loans and credit offers from a range of providers

Your bank account and bank statement
Account number	Your bank account's unique number.
Available balance	Your available balance is the money you have available to spend, taking into account any pending payments and excluding any checks that haven't yet cleared, as well as any arranged overdraft limit you may have agreed with your banking provider.
Deposit	This is money paid into your account.
Pending transactions	These are payments or deposits you've made – for example, with your debit card – that haven't yet cleared or been debited from your account.
Statement	Your bank statement shows all the transactions that have taken place over a set period of time. It also shows any interest and fees that have been added to, or deducted from, your account.
Transfer	This is when you send money between two accounts. You might make a transfer between two of your own accounts, for example, from an everyday bank account to a savings account. Or you might make a transfer from your account to someone else’s.
Withdrawal	This means money taken out of your account.

Your bank account and bank statement
Account number	Available balance	Available balance
Your bank account's unique number.	Your available balance is the money you have available to spend, taking into account any pending payments and excluding any checks that haven't yet cleared, as well as any arranged overdraft limit you may have agreed with your banking provider.	Your available balance is the money you have available to spend, taking into account any pending payments and excluding any checks that haven't yet cleared, as well as any arranged overdraft limit you may have agreed with your banking provider.

Account number	Deposit	Deposit
Your bank account's unique number.	This is money paid into your account.	This is money paid into your account.

Account number	Pending transactions	Pending transactions
Your bank account's unique number.	These are payments or deposits you've made – for example, with your debit card – that haven't yet cleared or been debited from your account.	These are payments or deposits you've made – for example, with your debit card – that haven't yet cleared or been debited from your account.

Account number	Statement	Statement
Your bank account's unique number.	Your bank statement shows all the transactions that have taken place over a set period of time. It also shows any interest and fees that have been added to, or deducted from, your account.	Your bank statement shows all the transactions that have taken place over a set period of time. It also shows any interest and fees that have been added to, or deducted from, your account.

Account number	Transfer	Transfer
Your bank account's unique number.	This is when you send money between two accounts. You might make a transfer between two of your own accounts, for example, from an everyday bank account to a savings account. Or you might make a transfer from your account to someone else’s.	This is when you send money between two accounts. You might make a transfer between two of your own accounts, for example, from an everyday bank account to a savings account. Or you might make a transfer from your account to someone else’s.

Account number	Withdrawal	Withdrawal
Your bank account's unique number.	This means money taken out of your account.	This means money taken out of your account.

Accessing your money
Arranged and unarranged overdrafts	An arranged overdraft is when you agree with your account provider in advance that you may borrow money when there is no money left in your account. You will agree to an arranged overdraft limit – which is the maximum amount that can be borrowed. You will usually pay interest on your overdraft, although sometimes you will have an initial, interest-free overdraft limit. An unarranged overdraft is when you borrow money when there is no money left in your account (or when you have exceeded your limit) and this has not been agreed with the account provider in advance.
Debit card	This is a card you can use to make cash withdrawals from ATMs, and may also be used to pay for goods and services in person, online or over the phone. When you use your debit card, the amount of the transaction is debited from your account.
Routing number	This is a unique code that identifies your bank branch.

Accessing your money
Arranged and unarranged overdrafts	Debit card	Debit card
An arranged overdraft is when you agree with your account provider in advance that you may borrow money when there is no money left in your account. You will agree to an arranged overdraft limit – which is the maximum amount that can be borrowed. You will usually pay interest on your overdraft, although sometimes you will have an initial, interest-free overdraft limit. An unarranged overdraft is when you borrow money when there is no money left in your account (or when you have exceeded your limit) and this has not been agreed with the account provider in advance.	This is a card you can use to make cash withdrawals from ATMs, and may also be used to pay for goods and services in person, online or over the phone. When you use your debit card, the amount of the transaction is debited from your account.	This is a card you can use to make cash withdrawals from ATMs, and may also be used to pay for goods and services in person, online or over the phone. When you use your debit card, the amount of the transaction is debited from your account.

Arranged and unarranged overdrafts	Routing number	Routing number
An arranged overdraft is when you agree with your account provider in advance that you may borrow money when there is no money left in your account. You will agree to an arranged overdraft limit – which is the maximum amount that can be borrowed. You will usually pay interest on your overdraft, although sometimes you will have an initial, interest-free overdraft limit. An unarranged overdraft is when you borrow money when there is no money left in your account (or when you have exceeded your limit) and this has not been agreed with the account provider in advance.	This is a unique code that identifies your bank branch.	This is a unique code that identifies your bank branch.

Common debit/credit terms
Credit and Debit	Credit is the amount of money you have available in your bank account. Your account is credited when money is paid into it. Credit is also a term that refers to your borrowing, loans and debt. A debit is money withdrawn from your bank account. It could be as a result of a payment you have made, or cash withdrawn at an ATM machine. When your account is ‘in debit’, it means it is overdrawn. Your bank statement may refer to ‘credits’ and ‘debits’, which refer to the individual ‘money in’ and ‘money out’ transactions that have occurred.
Credit score	Your credit score tells a lender about your credit history and helps them assess how much of a risk lending to you would be.
APR rate	APR (Annual Percentage Rate) refers to the combination of interest charged and any additional charges that you will pay on a loan or offer of credit. Lenders must tell you the APR before you sign a credit agreement with them. You can use the APR to compare the real costs of loans from a number of providers.
Annual interest rate	The annual interest rate and is generally used for savings and credit accounts.

Common debit/credit terms
Credit and Debit	Credit score	Credit score
Credit is the amount of money you have available in your bank account. Your account is credited when money is paid into it. Credit is also a term that refers to your borrowing, loans and debt. A debit is money withdrawn from your bank account. It could be as a result of a payment you have made, or cash withdrawn at an ATM machine. When your account is ‘in debit’, it means it is overdrawn. Your bank statement may refer to ‘credits’ and ‘debits’, which refer to the individual ‘money in’ and ‘money out’ transactions that have occurred.	Your credit score tells a lender about your credit history and helps them assess how much of a risk lending to you would be.	Your credit score tells a lender about your credit history and helps them assess how much of a risk lending to you would be.

Credit and Debit	APR rate	APR rate
Credit is the amount of money you have available in your bank account. Your account is credited when money is paid into it. Credit is also a term that refers to your borrowing, loans and debt. A debit is money withdrawn from your bank account. It could be as a result of a payment you have made, or cash withdrawn at an ATM machine. When your account is ‘in debit’, it means it is overdrawn. Your bank statement may refer to ‘credits’ and ‘debits’, which refer to the individual ‘money in’ and ‘money out’ transactions that have occurred.	APR (Annual Percentage Rate) refers to the combination of interest charged and any additional charges that you will pay on a loan or offer of credit. Lenders must tell you the APR before you sign a credit agreement with them. You can use the APR to compare the real costs of loans from a number of providers.	APR (Annual Percentage Rate) refers to the combination of interest charged and any additional charges that you will pay on a loan or offer of credit. Lenders must tell you the APR before you sign a credit agreement with them. You can use the APR to compare the real costs of loans from a number of providers.

Credit and Debit	Annual interest rate	Annual interest rate
Credit is the amount of money you have available in your bank account. Your account is credited when money is paid into it. Credit is also a term that refers to your borrowing, loans and debt. A debit is money withdrawn from your bank account. It could be as a result of a payment you have made, or cash withdrawn at an ATM machine. When your account is ‘in debit’, it means it is overdrawn. Your bank statement may refer to ‘credits’ and ‘debits’, which refer to the individual ‘money in’ and ‘money out’ transactions that have occurred.	The annual interest rate and is generally used for savings and credit accounts.	The annual interest rate and is generally used for savings and credit accounts.

Payments
Direct Debit	This is when you give a company permission to take money from your bank account on an agreed date. The company can change the amount or date, but they must notify you of the change first. Direct Debits are often used to pay household utility bills like your gas or electricity.
Payee	This is a company, or person, that you're paying.
Recurring transactions	These are payments you've agreed that a business can take from your debit or credit card when needed. These transactions can be difficult to keep track of, because they may vary in both amount and frequency. You have a right to cancel, however, so you may prefer to switch them to a payment method that’s easier to manage, like a Direct Debit.
Bill Pay	Bill Pay allows you to pay a company or a person within the U.S. from your checking account.

Payments
Direct Debit	Payee	Payee
This is when you give a company permission to take money from your bank account on an agreed date. The company can change the amount or date, but they must notify you of the change first. Direct Debits are often used to pay household utility bills like your gas or electricity.	This is a company, or person, that you're paying.	This is a company, or person, that you're paying.

Direct Debit	Recurring transactions	Recurring transactions
This is when you give a company permission to take money from your bank account on an agreed date. The company can change the amount or date, but they must notify you of the change first. Direct Debits are often used to pay household utility bills like your gas or electricity.	These are payments you've agreed that a business can take from your debit or credit card when needed. These transactions can be difficult to keep track of, because they may vary in both amount and frequency. You have a right to cancel, however, so you may prefer to switch them to a payment method that’s easier to manage, like a Direct Debit.	These are payments you've agreed that a business can take from your debit or credit card when needed. These transactions can be difficult to keep track of, because they may vary in both amount and frequency. You have a right to cancel, however, so you may prefer to switch them to a payment method that’s easier to manage, like a Direct Debit.

Direct Debit	Bill Pay	Bill Pay
This is when you give a company permission to take money from your bank account on an agreed date. The company can change the amount or date, but they must notify you of the change first. Direct Debits are often used to pay household utility bills like your gas or electricity.	Bill Pay allows you to pay a company or a person within the U.S. from your checking account.	Bill Pay allows you to pay a company or a person within the U.S. from your checking account.