When it comes to banking and finance, it can sometimes feel like there is a whole other language to learn. Here we’ve broken some of it down with plain English explanations of words you might hear.
Something you own that’s worth something; like cash, a car or a house.
The minimum rate of pay, set by the Fair Work Commission, that employees may be paid. Minimum rates vary for different groups.
The amount of money you have in your account or the amount you owe on an invoice, loan or credit card.
A balloon payment is a large payment at the end of some loans. In return for paying smaller repayments over a set period, you can agree to pay a big amount as your last payment. These are mostly used for business purposes but can also apply to buying a car.
A plan for earning, spending and saving your money.
Sometimes called an ATM card. This is a card you can use to access money in your bank account using an ATM or EFTPOS.
When you earn interest on interest you have already earned. Eg. In the first year, your balance of $100 earns 10% interest. You now have $110. In the next year you get to earn interest on $110 (the amount you deposited + the interest you earned) so at 10% you earn $11 and you now have $121.
When you borrow money with an agreement to pay it back. You usually have to pay interest on what you have borrowed.
A card that gives you access to a pre-approved amount of money you can borrow. When you use your credit card you are going into debt and will likely have to pay interest in the amount you borrow.
Measures how you handle debt and how likely you are to be able to pay back a loan. Is based on your past activity.
A card that is used like a credit card, but you use your own money so you don’t go into debt.
Amounts taken out of your gross income, like income tax.
The amount left over after you have paid for all your fixed costs. Eg Income – Fixed Costs = Disposable Income.
When you move money from one account to another electronically via online or phone banking.
Knowledge and understanding of finance and finance products that enable a person to make sound financial decisions that will benefit them.
Expenses that are not optional; loan repayments, power bills etc and are often the same or similar amount.
An interest rate that does not change for a set period of time eg 3 years.
The amount you make before any deductions are taken out.
An interest rate that is lower for the first part (or the honeymoon) of a loan. Also called an introductory rate.
Interest Free Offers
When you can borrow money (to make a purchase or to pay off a debt) without paying interest. The interest free period is usually only for a set time.
Interest Free Period
Sometimes offered with a credit card, it is a period of time where you don’t have to pay interest on the amount you spend/borrow.
The amount you pay the bank to use their money OR the amount the bank pays you for keeping your money in their account.
Usually expressed as a percentage per annum (or per year).
Sometimes offered by shops. Rather than paying for something all at once, you agree to make smaller payments over a period of time (usually 6-8 weeks). The shop agrees to hold the item for you until you have made the full payment. Cancellation fees may apply if you change your mind, so be sure to check out the details.
Line of credit
A pre-approved amount of money you can borrow at any time. Can be set up as a loan or attached to your transaction account (then it is called an Overdraft). The money stays with the bank until you use it. You start paying interest when you use the money and only pay interest on the amount you use.
Your ability to access cash or turn your assets into cash.
An amount of money paid all at once.
The way you handle your money and decide what to do with it.
The essentials of life – things that are necessary; food, shelter, water, clothing etc
An overdraft is a line of credit attached to your transaction account. You can borrow this money up to a pre-approved limit whenever your own money runs out.
A document recording your hours of work, income earned, deductions applied and any superannuation payments for the relevant pay period. Your payslip should also include the pay date, the payment period the payslip applies to, your employers name and ABN and your personal details.
A loan for personal use ie to buy a car, pay for renovations or a wedding. Usually less than $40,000 and with terms from 1-7 years.
The amount of money initially borrowed, before any interest has been applied.
To choose what is more important.
Money you have set aside for later.
A bank account specifically for saving. Usually offers interest for savings and may offer bonus interest for regular saving.
Interest calculated purely on the principal amount eg 10% interest on $100 is $10.
Money that is being saved for you to use in retirement. Compulsory contributions are paid by your employer once you earn a certain amount. You may also contribute to your superannuation via your pre-tax or post-tax income.
The place you keep your superannuation savings. Your fund will invest your money on your behalf.
Also called Net Income – the amount you get to take home after deductions have been taken out.
Money that is paid to the government for them to use to provide services and infrastructure.
A bank account where you deposit money for a set amount of time (a ‘term’) at a fixed interest rate. Eg 5%pa interest for 12 months.
An account that you use for your everyday spending. Usually offers little or no interest and may have greater accessibility than a savings account.
An expense that is a) not necessary and b) may change.
An interest rate that moves up and down according to the market.
Money you are paid (usually per hour) for performing an agreed set of duties
Things you would like to have or do that are non-essential; entertainment, eating out etc..
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|Any advice in this information is general and has been prepared without taking account of your particular objectives, financial situation or needs. Before you act on any advice you should consider whether it is appropriate for you. IMB Ltd trading as IMB Bank ABN 92 087 651 974 AFSL/Australian Credit Licence 237 391|