Financial glossary

Plain-language definitions of terms that appear across this directory. These explain what words mean. They are not advice, and none of them tells you what to do.

Institutions and regulation

Commercial bank

A bank that takes deposits and lends, serving individuals and businesses. In the United States its charter class determines which agency supervises it.

Credit union

A deposit-taking institution owned by its members rather than by shareholders. Membership usually depends on where you live or work.

Savings institution

A bank whose business is weighted towards deposits and property lending rather than commercial banking. Also called a thrift or savings association.

FDIC

The Federal Deposit Insurance Corporation. It insures deposits at member banks in the United States and publishes a register of them. Being FDIC-insured protects your deposits up to a limit; it is not an endorsement of the bank.

Deposit insurance

A government-backed guarantee that you get your money back, up to a stated limit, if the institution holding it fails. Limits are per depositor, per institution, and per ownership category.

Regulated firm

A company authorised by a financial regulator to carry on particular activities. Authorisation means it has met entry requirements and is supervised. It does not mean the regulator vouches for its service.

Ombudsman

An independent body that resolves disputes between consumers and financial firms, free to the consumer, once the firm has had a chance to respond. Its decisions are usually binding on the firm.

Borrowing

APR

Annual percentage rate. The cost of borrowing expressed as a yearly rate, including the interest and certain compulsory fees. It exists so two loans can be compared on one number — but only compare APRs for the same kind of product over the same term.

Secured and unsecured

A secured loan is tied to something the lender can take if you do not repay, such as a house or a vehicle. An unsecured loan is not, which is why it usually costs more.

Fixed and variable rate

A fixed rate stays the same for an agreed period. A variable rate moves, usually with a benchmark rate. Fixed is predictable; variable is not, in both directions.

Refinancing

Replacing an existing loan with a new one, usually to change the rate or the term. Whether it is worth doing depends on the fees to exit the old loan as much as the rate on the new one.

Origination fee

A charge for setting up a loan, often a percentage of the amount borrowed. It may be deducted from the money you receive rather than billed separately.

Early repayment charge

A fee for paying a loan off ahead of schedule. Worth checking before you take the loan, not when you want to leave it.

Investing and advice

Assets under management

The total value of the money a firm manages for its clients. It is a measure of size, not of performance or of service.

Fiduciary duty

An obligation to act in the client’s best interests rather than merely to recommend something suitable. Whether an adviser owes you one depends on the jurisdiction and on how they are engaged — it is a fair question to ask directly.

Fee-only and commission

A fee-only adviser is paid by you. A commission-based adviser is paid by the provider of the product they arrange. The second is not automatically worse, but it is a difference worth knowing about.

Expense ratio

The annual cost of running a fund, taken out of the fund’s assets and expressed as a percentage. You do not receive a bill for it; it comes out of your return.

Discretionary management

An arrangement where the firm makes investment decisions for you without asking each time, within an agreed mandate.

Insurance

Premium

What you pay for the cover, usually monthly or annually.

Excess or deductible

The amount you pay yourself on a claim before the insurer pays anything. A lower premium often means a higher excess.

Exclusion

Something the policy specifically does not cover. Exclusions decide whether a policy is any use to you far more often than the premium does.

Broker and insurer

An insurer carries the risk and pays claims. A broker arranges cover between you and an insurer, and is usually paid by the insurer.

Payments and business finance

Merchant services

The arrangements that let a business accept card payments, covering the terminal or gateway, the processing, and the account the money lands in.

Interchange

The portion of a card transaction fee that goes to the card issuer. It is set by the card networks, so it is the part of your processing cost a provider cannot discount.

Chargeback

A payment reversed at the cardholder’s request. Businesses usually pay a fee for each one regardless of who was right.

Settlement period

How long after a sale the money reaches your account. A cheaper rate with a longer settlement period can cost a small business more than it saves.

Invoice financing

Borrowing against invoices you have issued but not yet been paid for, to bring the cash forward.

Terms we use on this site

Claimed profile

Somebody at the company has taken control of the listing and maintains it. It is not an endorsement, and nothing they wrote has been independently checked.

Matched to a public register

An identifier for the company appears in a regulator’s own published register, which we link to. Appearing in a register is not approval, by the regulator or by us.

Paid placement

A company has paid to appear in a labelled band. It cannot buy position in search results, a rating, or a verification indicator.