An understanding of common banking terms gives you better control of your wallet, says Paul Maggott of Old Mutual.
"Thinking you know what a beneficiary is or the difference between a stop order and a debit order can be just as bad as not knowing at all.
"Yet, incredibly, people sign forms and make financial decisions without understanding the terminology."
He has provided an explanation for the following list of terms:
Prime rate: The interest rate at which banks lend money to credit-worthy customers. As a rule, the higher the risk, the more banks will charge above prime, and vice versa. It's one of the reasons why it's worth maintaining a good credit record. The prime rate is currently 12,5 percent.
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Debit order: An arrangement by which you give a company permission to regularly debit your account, for example, to pay a cellphone contract. The amount may vary each month and the debit order lasts as long as there is a contract between you and the company debiting your account. Debit orders can only be used if the service provider is authorised by the bank to use the debit order system.
Stop order: A stop order is an arrangement between you and the bank to pay a person or company a fixed amount every month, for example, rent payments to a landlord. These cost more than debit orders because the bank has more administration work.
Third-party payment: Technically, both stop and debit orders are ways to make third-party payments, but nowadays the term is mainly used to describe making payments via the Internet. The person or company you are paying is called the beneficiary. Most online banking sites allow you to load beneficiaries yourself, either as a once-off or regular payment. Paying beneficiaries online is more cost effective than using a stop or debit order and gives you more control over your finances.
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