In the world of finance and banking, terminology can sometimes be a barrier to understanding and managing your financial affairs. This guide aims to empower our customers with the knowledge they need to navigate banking. By demystifying common and more obscure credit union terms, you can become a confident and informed participant in the financial world.
Account Types:
Savings Account: A savings account is a secure place to store your funds while earning interest, making it ideal for building your savings over time.
Everyday Account: Also known as a transaction account, this is designed for everyday transactions. It provides easy access to your funds through methods like debit cards and electronic transfers.
Budgeting and Affordability: Lenders can help you understand your budget constraints and assess the affordability of homeownership. They can provide estimates of monthly mortgage payments, taking into account your income and expenses. This information helps you make informed decisions about the type and price range of homes you can realistically consider.
Term Deposit: A term deposit is a fixed-term savings account where you lock in your money for a specified period at a fixed interest rate. The deposited funds are not available until the fixed term has expired.
Christmas Club Account: A Christmas Club account is a specialised savings account designed to help you save for holiday expenses and gifts. This account is unable to be withdrawn from until the holiday season begins.
Interest:
Interest Rate: The interest rate is the cost of borrowing money or the return on investments, expressed as a percentage. It influences the amount of interest you earn or pay on loans or savings accounts.
Comparison Rate: The comparison rate includes not only the interest rate, but also other fees and charges associated with a loan. It helps borrowers compare loan products more accurately.
Loans and Credit:
Home Loan: A home loan, also known as a mortgage, is a loan taken to purchase a house. The property itself often serves as collateral.
Secured Loan: A secured loan is a type of loan that is backed by collateral, which is an asset or property you own. The collateral serves as a form of security for the lender in case the borrower fails to repay the loan. If the borrower defaults on the loan, the lender has the legal right to take possession of the collateral and sell it to recover the outstanding debt. Secured loans generally offer lower interest rates than unsecured loans because the collateral reduces the lender’s risk.
Unsecured Loan: An unsecured loan is a type of loan that is not backed by collateral. Unsecured loans are granted solely based on the borrower’s creditworthiness and ability to repay. These loans are often approved based on factors like credit history, income, and employment stability. Unsecured loans typically come with higher interest rates compared to secured loans because the lender takes on more risk without any collateral to recover their funds if the borrower defaults.
Personal Loan: A personal loan is a secured or unsecured loan typically used for various purposes, such as debt consolidation, travel, or unexpected expenses.
Overdraft: An overdraft is a credit facility attached to your transaction account that allows you to withdraw more money than is available in the account.
Auto Loan: An auto loan is a specific type of personal loan designed for purchasing a vehicle.
Banking Services:
BPAY: BPAY is an electronic bill payment system that allows you to pay bills conveniently through your online banking platform.
PayID: PayID is a unique identifier (e.g., your mobile number or email address) that simplifies transferring money between bank accounts.
Direct Debit: Direct debit is an automated payment method where a third party deducts funds from your account, often used for regular bills like utilities.
Direct Credit: A direct credit, also known as a bank transfer or electronic funds transfer (EFT), is a financial transaction where money is electronically transferred from one bank account to another. Direct credit is a secure and efficient way to move money, reducing the risk of loss or theft associated with physical forms of payment. It also provides a clear and traceable record of financial transactions for both senders and recipients.
Redraw Facility: A redraw facility allows you to access extra payments you’ve made on your loan, providing you with flexibility and convenience.
Fees:
Monthly Membership Fee: This fee is charged to maintain your account. It may be waived under certain conditions, such as meeting a minimum balance requirement, being under a certain age or being a student.
ATM Fee: An ATM fee is incurred when you use an ATM that is not part of the credit union’s network. It encompasses charges from the ATM owner.
Late Payment Fee: A late payment fee is charged when you miss a payment or fail to make a payment by the due date on your loan or credit card.
Honour Fee: An honour fee is charged when you miss a payment or fail to make a direct debit due to insufficient funds and the bank makes this payment on your behalf.
Dishonour Fee: A dishonour fee is charged when you miss a payment or fail to make a direct debit due to insufficient funds and the bank is unable to make this payment on your behalf.
Internet Banking:
Internet Banking: Internet banking allows you to manage your accounts, conduct transacons, and monitor your finances through the internet, using a secure website or mobile app.
Mobile Banking: Mobile banking is an extension of internet banking designed for smartphones and mobile devices. It offers the same features while providing the convenience of on-the-go access.
App Banking: App banking refers to the use of mobile applications provided by your credit union to manage your accounts, conduct transactions, and monitor your finances on the go.
Educating yourself about credit union terminology is one of the first steps in taking control of your financial future. Whether you are considering a new account, applying for a loan, or managing your credit, understanding these terms will enable you to navigate the financial world with confidence and make informed decisions for your specific financial journey!
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent.
