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Banking terms you need to know

Here is a list of some of the key terms you’ll want to know when it comes to making the most of your current account.

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 cheques that haven’t yet cleared.

From 24 November 2019, it does not include any arranged overdraft limit.

ATM

You can use automated teller machines (ATMs) to:

  • withdraw cash from your account
  • pay in cheques
  • pay bills
  • get statements

Using an ATM is usually free. Make sure you read the signs on the machine closely to double check you won't be charged a fee.

Balance

Your current account balance is the amount you are either in credit, or in debit (overdrawn). This balance may include transactions that are still being processed.

From 24 November, it does not include any arranged overdraft limit.

Basic bank account

This type of account offers the ability to:

  • send money
  • withdraw cash
  • set up standing orders
  • set up Direct Debits

However, basic bank accounts do not offer connected overdrafts.

BIC

This stands for Bank Identifier Code and is a number that identifies your bank. It's needed if you want to send or receive money from outside the UK. If you bank with HSBC, you'll find your BIC on your bank statement.

Credit

Credit is the amount of money you have available in your bank account. Your account is credited when money is paid into it.

Debit

When your account is in debit it is overdrawn. Your account is debited when money is withdrawn from it.

Debit card

You can use a debit card to make cash withdrawals from ATMs, as well as 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 current account.

Deposit

Money paid into your account.

Direct Debit

A payment from your bank account to another account on a date, or dates, agreed by yourself and the recipient. Unlike a standing order, the amount paid by a Direct Debit can be changed by the recipient, but they have to give you notice of this.

EAR

EAR stands for Equivalent Annual Rate. It is the rate you would pay on your overdraft if interest was charged annually on the amount you owe. It doesn't take into account any fees.

Financial Conduct Authority

Known as the FCA, this is the body that regulates the financial services industry in the UK, including banks and building societies. The FCA's role is to protect customers and promote healthy competition.

IBAN

This stands for International Bank Account Number. It identifies accounts held at any bank in any country, or region. If you're an HSBC customer, you'll find your IBAN on your bank statement.

Joint account

An account held by more than one person.

Arranged overdraft

Most current accounts allow you to apply for an arranged overdraft. This is a way of the account provider and you agreeing in advance that you may borrow money when there is no money left in your current account. The arranged overdraft limit – which is the maximum amount that can be borrowed – is based on your credit rating and how much you can afford. There will usually be a cost for using an arranged overdraft in the form of interest and sometimes fees.

Payee

The company, or person, you're paying.

Pending transactions

Payments or deposits you've made – for example, by cheque or debit card – that haven't yet cleared or been debited to your account.

Recurring transactions

Also known as a recurring payment or a continuous payment authority (CPA), this is a payment you've agreed that a business can take from your debit or credit card when needed. Recurring payments are different from Direct Debits and standing orders because your instruction is with the business, not the bank. They can vary in amount and frequency.

Sort code

This is a six-digit code that identifies your bank branch.

Standing order

A regular payment you make from your bank account. Unlike Direct Debits, the amount paid by a standing order is fixed and you're the only one who can change it.

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. You can access your bank statements online, or have paper statements sent to you by post.

Transfer

When you send money between your own accounts, for example from a current account to a savings account.

Withdrawal

Taking money out of your account.
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