The Big Banking Chat: What banking jargon really means

We tackle some of the most hard-to-understand jargon used by banks, and explain what it really means.

3 min read

The way the banking world talks is far too confusing. Obscure terms and jargon are thrown around as casually as famous song lyrics, and there’s an expectation that everyone understands the exact definition of what every term means—a fact which is even more annoying when you realize that everyone thinks about the term in a slightly different way. All of this creates confusion and frustration for consumers, and leaves them feeling like banks are deliberately leaving them in the dark.

This has to change—when it comes to talking about money, clarity matters. That’s because if people don’t understand what’s going on they either ignore the problem or grow resentful. And rightfully so—it can feel like banks use jargon deliberately to put up a wall between them and their customers, and ensure that every conversation starts with the bank on the front foot.

At N26, we never want to have that relationship with our customers or anyone else. So, as part of the research which informed The Big Banking Chat, we asked consumers across Europe and the US which banking terms they found most confusing. And we’ve provided translations for these terms below to make sure that everyone can bank with confidence.

An arranged overdraft is when you and your bank agree on a set amount of money you can have access to and spend, beyond your bank account balance. The arrangement outlines both how much money you can spend once your bank balance drops below zero, and also the combination of fees and interest you’ll have to pay in return for making use of your overdraft.

Your credit rating or score is simply an estimate of how financially trustworthy you are based on your financial history—things like your past performance paying credit card bills, and the number of direct debits linked to your personal account. It’s used by financial institutions to determine how much money is safe to lend to you—whether that’s in the form of a cash loan, a mortgage offer or credit card limit.

Accrued interest is the additional money you owe on a loan that has accumulated since you received the money or asset. How it accumulates depends on the terms of your loan contract and the money you repay will first pay off any accrued interest before you begin paying back the amount you initially borrowed.

The Annual Percentage rate shows you the overall cost of borrowing a sum of money. Crucially, it’s not always the same as the interest rate you’re paying, as it also includes any fees or charges you’re paying over the year. The reason it exists is to give you a tool to compare the overall costs of different lenders, but this isn’t always made clear.

A standing order is an instruction you give to your bank asking them to pay a fixed sum to a recipient on a regular basis. You define both the amount and how often and when it is paid. In contrast to a direct debit, you set up a standing order and retain control over it, meaning you can end it at any time, whereas a direct debit is set up by the company you are paying money to.


Hopefully these explanations have made understanding some of the most common terms used in banking a little easier for you—but we also know we’ve only scraped the surface of all the jargon that’s out there. So if there’s a phrase you need translating, then our social team is here to help. Just share your question on Twitter using #bigbankingchat and we’ll tell you what that jargon actually means.

By N26

The Mobile Bank

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