Business BTEC - personal finance key 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 persons 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. 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Money is uploaded onto a card with transactions then withdrawn to reduce the balance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 enables 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 services (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

Types of current account

Standard

Packaged, premium

Basic

Student

Standard current 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 current account

Usually has an annual fee or additional charge in return for offering extra incentives. These benifits can vary but many include offers such as discounted home insurence, no fee overdraft and premium access to popular event tickets

Basic current account

Offers limited features and would typically be held by a person with no credit history in the UK or poor credit history

Student current account

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

Types of borrowing

Overdraft

Personal loan

Hire purchase

Mortgage

Credit cards

Payday loan

Overdraft

Allows and 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 repay 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 receiving a wage

Credit cards (borrowing)

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

Types of saving and investment

Individual savings account (ISA)

Deposit and savings account

Premium bonds

Bonds and gilts

Shares

Pensions

Individual savings account (ISA)

A tax free way to save or invest

Deposit and savings account

An account where interest is paid on the balance

Premium bonds

A government scheme

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

Types of insurance

Car

Home and contents

Life assurance and insurance

Travel

Pet

Health

Car insurance

To cover both theft and accidents - there is legal requirements to insure any car that is on the road and thus protects the driver, passengers and other road users

Home and contents insurance

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 the home

Life assurance and insurance

Life assurance - an ongoing policy to pay a lump sum upon death

Life insurance - a policy set for a set period of time (e.g. mortgage time) to pay a lump sum if you die within that period

Travel insurance

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

Pet insurance

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 insurance

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 payments 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 store 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 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 its customers

National savings and investment

A government-backed organisation that offers a secure savings option

Insurance companies

Business that protect against the risk of loss in return for a premium. They are profit making organisations

Pensions companies

Businesses that sell policies to individuals, whether privately or through employers, to allow them to save now to fund retirement in the future

Pawnbrokers

Businesses or individuals who loan money against the security of a personal asset e.g. an item of jewellery

Payday loans

Organisations that offer a short term source of finance to bridge a gap between now and next receiving a wage

Methods of communication with customers

Branch

Online banking

Telephone banking

Mobline banking

Branch

A physical place where the customer will visit to carry out transactions

Online banking

The use of the internet to carry out banking transactions

Telephone banking

The use of a telephone to carry out banking transactions which may use either an automated service or require a customer advisor

Mobile banking (communication with customers)

The use of mobile devices e.g. mobile phones and tablets, to conduct financial transactions

Providers of financial information and guidance

Citizens advice

Independent financial advisor (IFA)

Price comparison sites

Money advice service

Debt counsellors

Individual voluntary arrangements (IVAs) bankruptcy

Citizens advice

An organisation, run by charities, that offers advice on a wide range of issues both financial and non-financial

Independent financial advisor (IFA)

Professionals who offer independent advice to their clients on financial matters e.g. savings, mortgages and mortgages and investments 

Price comparison sites

Websites that collects prices for similar goods and services within an industry, allowing customers to select the best deals

Money advice service

A government organisation set up to offer free and impartial financial advice in the UK

Debt councellors

A professional who offers independent advice on how best to manage debt

Individual voluntary arrangements (IVAs) bankruptcy

A government organisation that allows an individual to declare themselves bankrupt while agreeing to pay all or part of the money they owe to creditors