Managing your money can be tougher if you don’t understand some of the jargon.
So knowing what different terms mean when it comes to saving money and choosing a savings account can mean the difference between maximising your savings or giving it all away to your bank.
Here are a few terms to help you get started.
- ATM: ATM is short for automated teller machine. An ATM is a machine that is generally located outside your bank that allows you to deposit and/or withdraw cash from your savings account 24 hours a day 7 days a week.
- ATM Card: An ATM card is a plastic card with a magnetic strip on the back that is encoded with your account information. When inserted into an ATM, the mag reader decodes the information located on the mag stripe on the back of the card and allows you to access your savings account.
- Balance: Your balance is the amount of money you have in your savings account.
- Deposit: A deposit refers to the amount of money you are putting into your savings account at any given point.
- Direct Debit: A direct debit occurs when a payment is made directly from your savings account. This occurs more often with current accounts (known as ‘Checking’ accounts in the US and Australia, but can affect savings accounts as well. Think of it like something that ‘pulls’ money from your account…rather than a standing order that does a similar job but it is you ‘pushing’ money into another account.
- Electronic Banking: Electronic banking refers to the process of accessing your savings account via the Internet or mobile device to check your balance, set up a payment, or make a deposit. This can also be referred to as Internet Banking.
- Excess Usage Charge: Many banks will assign a limit to the number of transactions (deposits/withdrawals) you can make from your savings account each month. When the number of transactions exceeds this assigned limit, the bank will charge your account a fee.
- Interest Rate: The interest rate is the amount of interest your bank will pay you for the privilege of being named the custodian of your cash. Most, but not all savings accounts will earn interest on the balance of your account. In this case, the higher the interest rate, the better your rate of return on your deposit. There are two types of interest: simple and compound.
- Online Account Opening: This term refers to the process of opening a savings account with a bank through the use of a computer and the Internet.
- Over the Counter: Over the counter refers to the process of making a deposit or withdrawing cash from your savings account within a bank branch.
- Overdrawn: Being overdrawn means that you have withdrawn more money from your savings account than you had available. Most banks will allow your savings account to become overdrawn in certain instances and charge a fee.
- Personal Identification Number (PIN): Your PIN number is a code used to access your savings account when using an ATM or Internet banking.
- Savings: Savings refers to the money you set aside for use at a later time.
- Savings Account: A savings account is a bank product designed to help you with your savings goal. You deposit the money you wish to save into your savings account and allow it to grow with each subsequent deposit and interest payment.
- Simple Interest: Simple interest is the amount of money your bank pays you based on the balance in your savings account. Some banks pay monthly while others pay annually.
- Statement: A statement is a record of all of the activity on your savings account for a 1 month period. Deposits, withdrawals, payments, and interest will all be recorded on your monthly statement.
- Teller: A bank employee whose job it is to assist you with your banking transactions.
- Terms and Conditions: These are the rules that govern your savings account. The cost of maintaining an account, the interest rate, and many other details are included in your account’s terms and conditions.
- Transactions: The movement of money into or out of your savings account.
- Transfer: The movement of money from one account to another.
- And these are just a few of the terms you can familiarise yourself with in order to become a more savvy saver. Becoming a more knowledgeable about the terms used will help you make wiser decisions regarding who you choose to watch over your money.
These tips are brought to you by Andy, the co-founder of SavingUp.com.au, a comparison website specialising in savings accounts. Check out their guides to saving money for more helpful articles.
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