6 Basic Banking Terms

Here are 6 Basics terms to help you understand your bank.


A debit is when money is withdrawn from your account. So your debit card and any direct debits are debiting (taking away) money from your balance. Your bank statement might have a little D next to debit items.


When money is paid into your account, it’s called a credit. When your bank balance is above zero it’s ‘in credit’. Bank statements may have a CR next to credited items.

But don’t be confused by the word credit in credit cards. When you have a mortgage/loan/card you have actually borrowed credit – and you have to pay it back with interest.

To learn more about credit cards read 8 Credit Card Basics and 3 Useful Types of Credit Card.


If you spend more money than you have, you enter an overdraft. The bank is basically lending you that extra money, but it will most likely have a quite high fee or interest rate. You can sometimes agree an overdraft rate in advance with your bank.


Interest can be earned on money that you save (AER). It can also be charged on money you borrow (APR).

It’s a percentage rate which when applied to your balance increases the amount. Read more about AER, APR, compound interest, gross, net and tax free interest in my Interest Basics post.


This is your normal bank account. You’ll probably have your wages paid in and bills paid out of here. Usually they’ve been very poor for saving money, though that’s currently not always the case. Read my 6 Ways to Make Your Bank Account Pay article to find out more.


These are opened separately to your current account. Traditionally they are where you’d put money aside at higher interest rates. Interest on a Cash-ISA isn’t taxed. Read my 4 Savings Account Basics post here for more details.


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